The Boohoo Group PLC (LON: BOO) share price rose 8.29% after news emerged that Mike Ashley’s Frasers Group had increased its shareholding in Boohoo, raising its stake from 9.1% to 10.4% on Thursday, 31 August 2023.
The fast fashion retailer saw its share rise yesterday and today as investors reacted positively to Frasers' increased shareholding news. Frasers has described Boohoo as an “attractive proposition” due to its “laser focus on young female consumers” in the past.
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The increased shareholding in Boohoo comes when Frasers recently upped its stake in ASOS, another fashion retailer, from 18% to 19.3%. The news also boosted the ASOS share price as it is a vote of confidence in the company from one of its largest shareholders.
Frasers’ exact comments were: “We see potential synergies and an opportunity to strengthen our own brand proposition in collaboration with Boohoo, most obviously with Frasers Group brands I Saw It First and Missguided.”
Frasers increased its stake in ASOS on Friday, 25 August 2023, and barely a week later, it increased its stake in Boohoo, demonstrating its confidence in the two businesses. The vote of confidence was noted by other investors, as evidenced by the rally in Boohoo shares.
However, despite the current optimism, Boohoo and ASOS still face some crucial macroeconomic challenges driven by the high inflation, making consumers more conscious about their purchases leading to a high volume of costly product returns.
The two companies are also battling declining sales as consumers' disposable incomes are squeezed, leading to lower sales. However, Boohoo is well-positioned to rebound once market conditions change.
Boohoo is currently working to complete its American distribution network, building a massive warehouse to serve its customers in the country, given that the US is a critical market.
Frasers is also looking to form partnerships between Boohoo’s and ASOS brands. Since Frasers owns Sports Direct and other retail brands, collaboration between the retail brands should not be a difficult task since they are all in the retail marketing sector.
Given their looming partnerships with Frasers Group brands, Boohoo’s and ASOS’ prospects look promising.
Boohoo share price.
The Boohoo share price rose 8.29% to trade at 38.81p, from Thursday’s closing price of 35.84p.
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