Could Frasers Group 'over-elevate' itself?
Michael Murray is fast becoming one of the most powerful and influential players in the global luxury fashion and retail industries. The CEO of Frasers Group has been in charge of the £5.5 billion turnover of the retail empire since May 2022. The handsome and sporty 34 year-old is the perfect figurehead for the aspirational Frasers Group customer, particularly for its male consumer.
Frasers Group has used its strength and strong balance sheet from mass market sportswear to march into designer fashion. In December 2023, it snapped up one of the most well-known and respected of luxury online retailers, Matches, in a deal worth around £52 million. This has left many people asking whether this strategy of buying every struggling brand or retailer is sustainable, how big can the luxury market can grow in the current climate and will Frasers Group start to cannibalise and over elevate itself?
Frasers Group interests are almost too many to go into. It owns large chunks of Mulberry, Hugo Boss, ASOS and Boohoo. It acquired I Saw It First, Gieves & Hawkes and 14 brands once owned by JD Sports, many of which it subsequently merged into its luxury super-boutique chain Flannels or closed.
The ever-busy Murray recently posted on LinkedIn, regarding the things he was looking forward to in 2024, it reads: “Collaborating with the world’s biggest brands. Stay tuned it’s going to be a big year.” Also: “Expanding into new territories with some amazing new joint ventures, and probably some acquisitions.”
His recent acquisition, Matches has a turnover of around £380 million annually, while Flannels, who operates online and via 58 stores, had a revenue of around £335 million to April 2023. The two will crossover in many areas with brands and consumers but they also have quite distinct points of view and positioning. Talk, naturally, has turned to whether Matches will remain a separate brand. A source who supplies both Flannels and Matches told TheIndustry.fashion that their understanding, as it stands, was there were no plans to merge the brands.
At a recent talk at the Flannels X flagship on Oxford Street to celebrate the collaboration between 247 by Represent, MARCHON and Puresport, Murray gave little away, simply saying: "We just bought Matches before Christmas, so we've got to figure out integrating that with our wider luxury business.”
Matches HQ currently resides at Level 7, The Shard, and it's hard to see that particular lease being renewed. From an operational perspective, it makes sense for Frasers to look for savings and synergies between Matches and Flannels. However the Matches brand has a lot of respect and heritage, especially with the London customer, whose introduction to the brand will have come via its stores in upmarket neighbourhoods, such as the original site in Wimbledon. It's gone on to gain a global reputation and has been a respected taste-maker in fashion since it was established more than 30 years ago.
At the recent Flannels talk, Murray also mentioned the importance of technical sportswear in its luxury strategy. It is no longer enough to just iron a luxury brand name onto sports clothing and trainers to address this market, brands now need to have an authentic performance element to their range. Murray is clearly seeing the luxury market shift to premium sportswear brands like Arc’teryx and Salomon. (The parent company of both brands, Amer Sports, recently announced an IPO with revenues in the first nine months of 2023 up 30 per cent to $3.1bn.)
Equally, designer labels are filling collaborations with technical sports partners. Louis Vuitton just showcased a footwear collab with Timberland, Loewe is running with On, and, on a more affordable level, Reiss has released a collection with British ‘precision performance sportswear brand', Castore.
This shift to luxury sports could be Murray’s answer for both Flannels and Matches. Push Flannels, which is arguably a more masculine-facing brand both visually with its glossy black tiling and intimidating doormen into luxury technical sportswear and leave Matches to have a softer and more feminine lens on designer fashion. It could be a complementary balance of markets while saving on head office, logistics, warehousing and anything backend.
Matches has always had strength at introducing young or new designers and its famous marbled packaging can still be seen at the bottom of fashionistas’ wardrobes all over the country. Flannels is yet to find its USP.
Many sceptics see Frasers Group’s luxury division as a house of cards held up on the foundations of its flagship sports retail brand Sports Direct. Frasers Group’s elevation strategy has worked so far while the designer market flourished, but now that is running out of steam – there was a reason Matches was marked down at such a bargain basement price – things are much tougher. The days of brand names simply selling themselves is over. The market, especially online, is far more cut-throat and many luxury brands are trying to move away from wholesale and take the customer for themselves at the same time.
Moving Frasers Group into new territories makes sense for Murray and its size will make that easier, but it needs to fine tune what it already has without adding more. Flannels and Matches will be stronger together, but the luxury market overall is looking weaker for everybody.