#8: Frasers – hitting it for 2026

This is #8 in our "Twelve Stocks of Christmas 2025" Series. You can review the full set here.

The Pitch

Frasers (LON:FRAS) is a main-market-listed retailer. With a StockRank of 91, many subscribers will have heard of this SuperStock’s stores, trading under well-known marques, such as Sports Direct, House of Fraser, USC, GAME and Evans Cycles. In an incredibly tough retail environment, this business stands out as one that has the financial strength to take advantage of the weakness of others. Indeed, the company regularly acquires brands or assets, where Frasers’ feels that they could run them better than the existing management.

The Big Picture

Frasers is my Value pick for the “12 Stocks of Christmas” with a Value Rank of 91.

• Single-digit P/E: A forward P/E of less than 7 suggests that this business is ex-growth. However, it has a strong track record of entrepreneurial and opportunistic growth, which I don't see diminishing over the long-term.
• Large liquidity: The company has around £1bn of debt, but this is more than offset by £600m of investment properties, and £1.2bn in quoted and unquoted investments. A recent refinancing saw them increase their debt facility to £3.1bn, giving them a huge £2bn of liquidity that could be deployed on acquisitions.
• Operational gearing: Although sales have only grown by 5% pa, this has led to EPS compounding at 17% CAGR over the last five years. The majority of earnings end up as free cash flow over the long-term.

Going Deeper

Frasers has developed what they call an Elevation Strategy. This focuses on brands, products, digital, and store experiences. They aim to put the old Sports Direct model of selling sports equipment and clothing at the lowest price behind them and now split their sales into three categories: sport, premium, and luxury. Selling higher-end brands and products has become as important as sporting goods.

These are the key elements of this strategy:

• Brand partnerships: building relationships with the best brands in the sports, premium, and luxury sectors.
• Store experience: Investing in creating flagship stores with digital tech and an improved layout.
• Digital: Investing in digital innovation.
• Brand acquisition: The company has never backed away from being a brand owner as well as a retailer.
• Membership schemes: In 2023, they launched Frasers Plus, which is a buy-now, pay-later credit supplier and reward scheme.

There are several reasons that Frasers looks likely to be an outperformer in 2026:

• Strongest retailer: The combination of listed and property assets means that banks are willing to lend Frasers significant amounts of money. This liquidity should enable them easily trade through any weak consumer demand. They will be able to use that strength to buy struggling retailers, brands or assets at bargain prices.
• International growth: acquisitions, combined with the opening of Sports Direct stores abroad, have helped their international revenue grow by 43% in the last half-year. This provides diversification and growth potential that may not be present to the same extent in their home markets.
• Retail recovery: While the current UK retail environment may be weak, this is undoubtedly cyclical. With the market being typically forward-looking, a recovery in 2027 will start to be priced in 2026.
• Share buyback: Frasers doesn’t pay a dividend, but it is committed to a large and ongoing share buyback program. This enables it to buy back shares at a mid-single-digit P/E.

What The Brokers Say

Recent analyst consensus shows a mix of Buy and Hold ratings, with the majority leaning towards Hold. However, the current average 12-month price targets are around 870p, which would be a 30% potential upside from the current share price. The most bullish broker, Bank of America, has a price target of 1107p, which would represent a great return in such a short period.

The Bear Case

While the possible upside may be impressive, investors need to consider this in the context of the risks they are taking in owning the shares. Here, there are a couple of these that stand out:

• Management control: Mike Ashley controls around 73% of the shares, and with an ongoing buyback, this is only likely to increase. This gives him significant control, and while he isn’t CEO anymore, that position has been taken by his son-in-law, which suggests he still has a large amount of influence on how this business is run.
• Retail conditions: organic like-for-like top-line growth for 2026 is likely to be lacklustre, as the consumer conditions in the UK and Europe are likely to remain weak fin the near term.

The Bottom Line

The ownership and management structure marks this as unusual, and perhaps riskier than many companies, from a corporate governance perspective. Independent shareholders are largely along for the ride. However, they are hitching their wagon to an entrepreneurial team with a history of successfully taking advantage of market conditions and growing the company into the retail giant it is today. If 2026 retail conditions are as weak as many commentators suggest, the winners will be the companies that execute best and have the most liquidity. Frasers is likely to be amongst those.