Rationalisation, elevation, transformation

Frasers Group initiate Buy, £10

29 November 2022

Analysts:
Georgios Pilakoutas Simon Bowler
g.pilakoutas@numis.com s.bowler@numis.com
+44 (0)20 7260 1427 +44 (0)20 7260 1262

This research was prepared & approved by: Numis Securities Ltd, 45 Gresham Street, London EC2V 7BF
For important disclosure information relating to Numis Securities Limited, including analyst certification, investment banking relationships, if any, with any
companies mentioned in this report, and potential conflicts of interest, please refer to pages 28 to 30, especially analyst certification on page 28, the important
disclosure section on page 28 and the additional disclosure on page 28.

Numis Securities Limited is authorised and regulated by the Financial Conduct Authority. A member of the London Stock Exchange. Incorporated in England and
Wales. Registration No. 02285918
Rationalisation, elevation, transformation
Framing the equity story
Retail – from fragmentation to consolidation for incumbents aka “Platforms” Brands – Elevation key to becoming “partner of choice”

Divisional breakdown Key themes

Sports Direct UK– still dominant UK Sports Performance retailer, generating c.£220m Platform – investment into store network, freehold, automation, digital capabilities,

FCF p.a., fairly mature. M&A + Credit? bolt-on M&A

Premium Lifestyle – Flannels already at c.5% UK Luxury Goods market, good visibility on Elevation – strategy started in 2016 in response to greater distribution rationalisation by

reaching c.10% and creating a c.£100m FCF business (NSe c.£80m) Luxury & Sporting Goods brands

Europe – consolidating the European Sports Performance market, upside from Brand – strengthening brand relationships unlocking product in existing (UK Sports) and

execution + inorganic growth, German DC ambitions for c.£4bn Rev (NSe 26e £1bn) increasingly new (Luxury, Europe) markets

Cash - >£300m FCF p.a. growing 10%+. Excess capital returned through buybacks or acquisitions

Valuation - Initiate, Buy recommendation, TP £10 applying an 8.0% Cal-24 FCF Yield or equivalent to c.10x PE

Upside – LTIP at £15, buying into growth initiatives in Luxury and Europe

Numis Securities Limited is authorised and regulated by the Financial Conduct Authority.
Rationalisation, elevation, transformation A member of the London Stock Exchange. Incorporated in England and Wales. Registration No. 02285918 2
Forecasts with divisional breakdown
UK Sports Retail c.62% 23e EBITDA, fuelling the growth of Premium Lifestyle and European Retail which account for c.80% of growth

FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23e FY24e FY25e FY26e
UK Sports Retail 1,812 1,908 2,009 2,225 2,181 2,187 2,203 1,969 2,582 2,970 2,970 3,044 3,105
UK Premium Lifestyle 214 208 181 114 162 535 722 736 1,057 1,432 1,708 1,930 2,111
European Retail (inc RoW) 463 491 482 665 830 816 872 768 941 956 981 1,026 1,068
Wholesale & Licensing 218 226 232 241 186 164 160 153 168 177 178 183 187
Revenue 2,706 2,833 2,904 3,245 3,359 3,702 3,957 3,625 4,747 5,534 5,837 6,182 6,471
- LFL % 0% -1% -1% -4% 6% 0% -7% -11% 27% 2% 2% 3% 3%
- Space % 0% 6% 2% 2% -4% -1% -2% -1% 2% 4% 3% 2% 2%
- inorganic % 23% 0% 1% 14% 2% 11% 16% 4% 2% 11% 1% 0% 0%
- yoy % 23% 5% 3% 12% 4% 10% 7% -8% 31% 17% 5% 6% 5%
Gross profit 1,156 1,241 1,285 1,331 1,335 1,584 1,663 1,531 2,074 2,323 2,464 2,617 2,742
Gross margin % 42.7% 43.8% 44.2% 41.0% 39.7% 42.8% 42.0% 42.2% 43.7% 42.0% 42.2% 42.3% 42.4%
UK Sports Retail 256 285 355 261 288 265 227 375 469 491 505 521 534
UK Premium Lifestyle -20 -8 -5 4 6 -38 5 83 153 139 191 231 264
European Retail (inc RoW) 65 73 -6 -20 -9 28 45 105 190 139 149 160 169
Wholesale & Licensing 30 34 38 26 30 33 25 28 15 20 21 22 23
Underlying EBITDA (IFRS from 2020) 319 374 374 270 318 296 318 592 827 789 865 933 990
UK Sports Retail 14.1% 14.9% 17.7% 11.7% 13.2% 12.1% 10.3% 19.0% 18.2% 16.5% 17.0% 17.1% 17.2%
UK Premium Lifestyle -9.5% -3.7% -2.8% 3.9% 3.9% -7.1% 0.6% 11.3% 14.5% 9.7% 11.2% 12.0% 12.5%
European Retail (inc RoW) 14.1% 14.8% -1.2% -2.9% -1.1% 3.5% 5.2% 13.6% 20.2% 14.5% 15.2% 15.6% 15.8%
Wholesale & Licensing 13.9% 15.1% 16.2% 10.9% 16.2% 19.9% 15.8% 18.3% 9.0% 11.5% 11.6% 12.0% 12.2%
EBITDA margin % 11.8% 13.2% 12.9% 8.3% 9.5% 8.0% 8.0% 16.3% 17.4% 14.3% 14.8% 15.1% 15.3%
Adjusted PBT (company) 248 300 274 113 143 152 (86) (39) 344 475 500 559 608
- margin % 9.2% 10.6% 9.4% 3.5% 4.2% 4.1% -2.2% -1.1% 7.3% 8.6% 8.6% 9.0% 9.4%
FCF 193 213 208 83 180 126 115 300 367 327 354 394 427
- margin % 7.1% 7.5% 7.1% 2.6% 5.4% 3.4% 2.9% 8.3% 7.7% 5.9% 6.1% 6.4% 6.6%
Source: Numis Research
Numis Securities Limited is authorised and regulated by the Financial Conduct Authority.
Rationalisation, elevation, transformation A member of the London Stock Exchange. Incorporated in England and Wales. Registration No. 02285918 3
Change in DNA?

Since 2016…

• Strategy.
• 2017 Annual Report the group refreshed its strategy placing notable emphasis on third party brands and coining the term becoming the “Selfridges of sport”

• Investment.
• Capex (inc Freehold) went from c.3% sales (or c.£80m p.a.) FY13-15 to c.7.5% sales (or c.£250m p.a.) FY17-22 with investment primarily in freehold and warehousing
• Buybacks of c.£0.5bn since FY17
• M&A spent net c.£0.2bn, focussed on turnaround opportunities with focus on WC investment and cost reduction

• Management.
• Former exec board replaced (Dave Forsey CEO, Keith Hellawell Chair)
• Mike Ashley (founder) retains c.67% holding, but stepped down as CEO and the board this year
• Michael Murray joined in 2016, appointed Head of Elevation in 2019 and CEO this year
• Broader refreshed exec team: Chair David Daly (joined 2017, ex Nike). Four key commercial heads and two new divisional heads including recent joiner Ger Wright (ex Nike)

• Re-naming. Sports Direct → Frasers Group

• Engagement. Availability, pro activity, disclosure, CMD…

Frasers Group 2022 Annual Report Mission Statement

To serve our consumers with the World’s best Sports, Premium and
Luxury brands
Numis Securities Limited is authorised and regulated by the Financial Conduct Authority.
Rationalisation, elevation, transformation A member of the London Stock Exchange. Incorporated in England and Wales. Registration No. 02285918 4
UK Sports Retail
Group engine in good health, improving access to product and successfully launching into adjacent verticals

UK Sports Retailers Revenue 2019, £m

• Scale. FY22 £2.6bn Revenue 2,500

• Range. 71k SKUs, 1.2k brands 2,000

• 71k SKUSs and typically 3-4x non-specialists

1,500
• Improving access to product launches
• Expanded online selection benefitting from automation 1,000

• Value. Price leadership (Own brand) 500

Convenience. 474 well invested stores

0
•

Sports Direct
Lululemon

adidas

JD & Size UK
(incl Bike 24)

Warehouse
Sweaty Betty

Footasylum

Halfords
Angling Direct

Decathlon

Outdoors
Nike
Foot Locker

JD Sports
Wiggle CRC

Cycle Concepts
Gymshark

cycling
Mountain
Outdoor &
• New verticals. USC, Game, Evans Cycle, Gyms, Studio Retail

Frasers UK Sports Retail Revenue FY06-19, £m

2,500

2,000

1,500

1,000

500

0
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22

Numis Securities Limited is authorised and regulated by the Financial Conduct Authority.
Rationalisation, elevation, transformation A member of the London Stock Exchange. Incorporated in England and Wales. Registration No. 02285918 5
UK Sports Retail
Core proposition: Value and Range
Entry product prices for 11 key items. Indexed to SD = 100 Stable of own-brands

SKU count across 9 categories indexed to SD=100 Nike, adidas and Puma football boot ranges
140 120 35

120 100 30

100 25
80
80 20
60
60 15
40
40 10

20
20 5

0 0 0
<50 50-100 100-150 >150 <50 50-100 100-150 >150 <50 50-100 100-150 >150

Nike JD Sports Sports Direct Adidas JD Sports Sports Direct Puma JD Sports Sports Direct

Numis Securities Limited is authorised and regulated by the Financial Conduct Authority.
Rationalisation, elevation, transformation A member of the London Stock Exchange. Incorporated in England and Wales. Registration No. 02285918 6
 UK Sports Retail
Group engine in good health, improving access to product and successfully launching into adjacent verticals

Investment into stores… …marketing… …and online

Is unlocking exclusive access to product Unique position for bolt ons in adjacent categories, notably credit

Numis Securities Limited is authorised and regulated by the Financial Conduct Authority.
Rationalisation, elevation, transformation A member of the London Stock Exchange. Incorporated in England and Wales. Registration No. 02285918 7
Premium Lifestyle
Group scale / investment has created platform for attractive Flannels roll-out

UK Premium lifestyle GTV (£m)

• Flannels.
1,400
• Luxury shopping outside London
1,200

• FY22 Sales £475m from 42 stores (NSe) 1,000

• FY26e target £2bn Gross Sales (£1.6bn Net Sales) with c.100 stores 800

• 2022: 1st UK wholesale partner for Lululemon, working with Hermes Beauty (only 15 globally) 600

400
• House of Fraser. Reduced costs, trading well 200

0
• Other e.g. Jack Wills, Sofa.com, Missguided / I Saw It First

FY19

FY20
FY12

FY13

FY14

FY15

FY18
FY16

FY17

FY21

FY22

FY23e
Flannels HoF Other Missguided + I Saw It First

Liverpool store front Barry’s Bootcamp Burberry Lola bag pop up Recent Flannels store openings
Type Year of opening Sq ft (k)
Fosse Park Regional flagship FY22 40
Liverpool Regional flagship FY22 120
Preston Regional FY22 15
Meadowhall Regional flagship FY22 55
Southampton Regional FY22 22
Preston Regional FY22 15
Brookfield Retail Park Regional FY22 15
Essex Regional FY22 12
Livingston Regional FY22 18
Birmingham Regional FY21 12
Belfast Regional FY21 30
Oxford Street Flagship FY20 18

Numis Securities Limited is authorised and regulated by the Financial Conduct Authority.
Rationalisation, elevation, transformation A member of the London Stock Exchange. Incorporated in England and Wales. Registration No. 02285918 8
Flannels
On track to deliver £2bn Gross sales in UKI by FY26e, equivalent to c.10% share of UK Luxury & Premium market

Luxury & Premium UK market share split, 2019

For consumers – luxury shopping experience to customers outside of London
Others, 18%

For brands – growth of D2C through online and Tier 1 stores. Rationalisation of wholesale to shorter
YNAP, 1% list of well invested, largely physical (experience)
Farfetch, 1%
D2C (ex
Harvey Nichols, 2%
Flannels, 2% consessions), Unlocking products e.g. first wholesale partner of Lululemon in the UK, one of 15 Hermes Beauty
Fenwick, 2% 45% distributers globally
Watches of
Switzerland, 4%

Selfridges, 12%
Flannels Revenue build, FY18-26e
FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26
Stores 21 31 37 41 53 65 76 84 90
Harrods, 14% - Net New Stores 8 10 6 4 12 12 11 8 6
Avg Stores 17 26 34 39 47 59 71 80 87
UK Luxury Retailers Google Trends (4wk, rel)
- Avg Space Net New 13.0 14.0 17.3 9.3 25.0 25.0 22.0 22.0 22.0
100% Store
90% Space (k sq ft) 238 368 472 509 809 1,109 1,351 1,527 1,659
80% Avg space 190 303 420 491 659 959 1,230 1,439 1,593
70%
Avg store size (k sq ft) 11.2 11.7 12.4 12.6 14.0 16.3 17.4 18.0 18.3
60%
50% Sales per Avg Store 6.5 6.7 7.5 7.7 10.1 12.9 14.7 15.9 16.8
40% Sales per k sq ft 579 574 609 615 721 793 841 883 918
-YoY % -1% 6% 1% 17% 10% 6% 5% 4%
30%
20% Revenue 110 174 256 302 475 760 1,034 1,270 1,462
10% - LFL 35% 11% 16% 5% 30% 24% 13% 9% 7%
0% - Space 47% 48% 31% 13% 27% 36% 23% 14% 9%
Oct-17 Jul-18 Apr-19 Jan-20 Oct-20 Jul-21 Apr-22
- YoY % 82% 58% 47% 18% 57% 60% 36% 23% 15%

Selfridges Harrods Flannels Farfetch Net-a-Porter

Numis Securities Limited is authorised and regulated by the Financial Conduct Authority.
Rationalisation, elevation, transformation A member of the London Stock Exchange. Incorporated in England and Wales. Registration No. 02285918 9
Premium Lifestyle
Group scale / investment has created platform for attractive Flannels roll-out

Premium Lifestyle forecasts, FY18-26e

Flannels the key driver of Revenue growth and margin Premium Lifestyle
FY18
FY19 FY20 FY21 1H 2H FY22 FY23e FY24e FY25e FY26e
progression HoF GTV 503 486 201 422 394 349 324 304
Other GTV 58 161 285 257 356 384 384 384
House of Fraser – from £528m GTV down to c.£400m, Flannels GTV 174 256 302 475 760 1,034 1,270 1,462
gone from 59 stores to 39 stores, medium-term 25. GTV 733 903 788 468 666 1,134 1,510 1,767 1,978 2,150
Significantly improved profitability through closure of -yoy % 0% 23% -13% 34% 52% 44% 33% 17% 12% 9%
loss making stores, bolting in other brands and Flannels revenue 110 174 256 302 475 760 1,034 1,270 1,462
reducing opex (synergies) HoF revenue 303 306 149 325 315 290 276 265
Other revenue 52 58 161 285 257 356 384 384 384
Other brands – growing stable of brands across Revenue 162 535 722 736 428 629 1,057 1,432 1,708 1,930 2,111
heritage, luxury sports boutiques and digital natives - yoy 43% 230% 35% 2% 34% 51% 44% 35% 19% 13% 9%
Gross profit 54 247 349 330 204 271 475 605 726 826 905
- margin 33.3% 46.2% 48.3% 44.9% 47.7% 43.0% 44.9% 42.2% 42.5% 42.8% 42.9%
-bps yoy -1.9% 12.9% 2.1% -3.4% 0.8% -0.3% 0.0% -2.7% 0.3% 0.3% 0.1%
- margin (GTV) 33.7% 38.6% 41.9% 43.7% 40.6% 41.9% 40.0% 41.1% 41.7% 42.1%
Total Operating (48) (285) (344) (247) (122) (200) (321) (466) (536) (595) (641)
costs

-margin -29.4% -53.3% -47.7% -33.6% -28.4% -31.8% -30.4% -32.6% -31.4% -30.8% -30.4%
-yoy 34% 499% 21% -28% 27% 32% 30% 45% 15% 11% 8%
-margin % (GTV) -38.9% -38.1% -31.4% -26.0% -30.0% -28.3% -30.9% -30.3% -30.1% -29.8%
Underlying EBITDA 6 (38) 5 83 83 71 153 139 191 231 264
(IFRS 16 from FY21)

-margin % 3.9% -7.1% 0.6% 11.3% 19.4% 11.2% 14.5% 9.7% 11.2% 12.0% 12.5%
-margin % (GTV) -5.2% 0.5% 10.5% 17.7% 10.6% 13.5% 9.2% 10.8% 11.7% 12.3%

Numis Securities Limited is authorised and regulated by the Financial Conduct Authority.
Rationalisation, elevation, transformation A member of the London Stock Exchange. Incorporated in England and Wales. Registration No. 02285918 10
International Retail
Brand backing enables European playbook

• European false dawns. European Stores

• Baltic and Austrian acquisitions faced challenges as struggled to adapt local offering, especially without 3 rd party support

• Brand partner of choice

• Dick’s (US) and Sports Direct (UK, Ireland) are Sports Retailers of choice
• Brands “blessing” for Frasers to roll out its playbook in Europe
• Bitburg (Germany) site will have up to 2.4m sq ft, capacity for 300m units p.a.
• Expect acceleration in organic (e.g. Spain) and inorganic growth
• Acquisition of SportsMaster in Denmark, 1st European acquisition (ex ROI) since 2016
• 3rd party brand rationalisation creating healthy pipeline

European Stores
50
45
40
35
30
25
20
15
10
5
0

Spain
Estonia

Czech
Portugal

Slovenia

Slovakia

France
Austria

Latvia

Lithuania

Poland

Germany
Hungary

Cyprus

Luxembourg

Iceland
Rep. Ireland

Belgium

Netherlands

FY18 FY22

Numis Securities Limited is authorised and regulated by the Financial Conduct Authority.
Rationalisation, elevation, transformation A member of the London Stock Exchange. Incorporated in England and Wales. Registration No. 02285918 11
International Retail
Strategy reset unlocking European expansion opportunity

SportsMaster Denmark
• 70 stores generating c.£100m
• 1st European acquisition (ex ROI) since 2016

Expect acceleration in organic and inorganic growth

• 3rd party brand rationalisation creating healthy pipeline
• New distribution site in Bitburg, Germany. Will be up to 2.4m sq ft with handling capacity for up to 300m
units p.a. (estimate c.£4bn Sales)
• Flannels concept is being rolled out in Ireland

European Retail forecasts, FY18-26e

European Retail FY18 FY19 FY20 FY21 FY22 FY23e FY24e FY25e FY26e
Revenue 637 600 698 615 790 911 937 982 1,024
- LFL -2% 1% -13% -16% 21% 1% 1% 3% 3%
- Space 0% -7% 1% -5% 2% 2% 2% 2% 2%
- Inorganic 2% 0% 32% 9% 0% 11% 0% 0% 0%
- FX 0% 0% -4% 0% 5% 1% 0% 0% 0%
- yoy 0% -6% 16% -12% 28% 15% 3% 5% 4%
Gross profit 260 262 268 240 337 373 386 406 425
- margin 40.8% 43.6% 38.4% 39.0% 42.7% 41.0% 41.2% 41.4% 41.5%
-bps yoy -2.5% 2.8% -5.2% 0.6% 3.7% -1.7% 0.2% 0.2% 0.1%
Total Operating costs (247) (232) (216) (162) (187) (240) (242) (252) (261)

-margin -38.7% -38.7% -31.0% -26.3% -23.7% -26.3% -25.9% -25.7% -25.5%
-yoy -17% -6% -7% -25% 16% 28% 1% 4% 4%
Underlying EBITDA 13 29 52 78 150 133 144 154 164
-margin % 2.1% 4.9% 7.4% 12.7% 19.0% 14.7% 15.3% 15.7% 16.0%

Numis Securities Limited is authorised and regulated by the Financial Conduct Authority.
Rationalisation, elevation, transformation A member of the London Stock Exchange. Incorporated in England and Wales. Registration No. 02285918 12
Group P&L
Medium-term: 2-3% LFL + 2-3% Space = c.5% p.a. Revenue growth. Margins +150bp = PBT / FCF c.+9% p.a.

Group FY14-26e P&L and adj FCF FY22 to FY23e forecast bridge
Year end April (£m) FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23e FY24e FY25e FY26e Revenue Gross uEBITDA Adj PBT Adj FCF
Revenue 2,706 2,833 2,904 3,245 3,359 3,702 3,957 3,625 4,747 5,534 5,837 6,182 6,471 Profit
FY22 4 747 2 074 827 344 367
- yoy 23% 5% 3% 12% 4% 10% 7% -8% 31% 17% 5% 6% 5%
UK Sports Retail (11) (27) 2 2 2
Gross profit 1,156 1,241 1,285 1,331 1,335 1,584 1,663 1,531 2,074 2,323 2,464 2,617 2,742 Premium Lifestyle 255 89 (36) (36) (36)
- margin 42.7% 43.8% 44.2% 41.0% 39.7% 42.8% 42.0% 42.2% 43.7% 42.0% 42.2% 42.3% 42.4% International 34 12 (25) (25) (25)
Wholesale & Licensing 8 7 5 5 5
Total Operating costs (825) (857) (903) (1058) (1011) (1287) (1345) (939) (1247) (1534) (1599) (1683) (1752)
M&A 502 167 15 15 15
-margin -
30.5% -30.3% -31.1% -32.6% -30.1% -34.8% -34.0% -25.9% -26.3% -27.7% -27.4% -27.2% -27.1% D&A / Capex (13) 2
Underlying EBITDA 319 374 374 270 318 296 318 592 827 789 865 933 990 Property adjustments / Lease 199 41
costs
-margin % 11.8% 13.2% 12.9% 8.3% 9.5% 8.0% 8.0% 16.3% 17.4% 14.3% 14.8% 15.1% 15.3%
Interest (16) (15)
Associates 2 3 2 0 -9 -9 -16 0 0 0 0 0 0 Tax (31)
D&A (64) (67) (96) (148) (156) (125) (145) (225) (181) (194) (193) (198) (201) FY23e 5 534 2 323 789 475 327

- % to sales -2.4% -2.4% -3.3% -4.6% -4.6% -3.4% -3.7% -6.2% -3.8% -3.5% -3.3% -3.2% -3.1%
Depreciation of leases 0 0 0 0 0 0 (123) (82) (78) (78) (82) (86) (91)
Property adjustments 0 0 0 0 0 0 (127) (292) (199) 0 (40) (40) (40)
Underlying EBIT 255 307 279 122 162 171 (77) (8) 370 517 550 609 659
- margin 9.4% 10.8% 9.6% 3.8% 4.8% 4.6% -1.9% -0.2% 7.8% 9.3% 9.4% 9.9% 10.2%
Financial Interest (7) (7) (5) (9) (20) (19) (9) (20) (14) (28) (35) (35) (35)
Lease Interest 0 0 0 0 0 0 (11) (12) (12) (14) (15) (15) (16)
Adjusted PBT (company) 248 300 274 113 143 152 (86) (39) 344 475 500 559 608
- margin % 9.2% 10.6% 9.4% 3.5% 4.2% 4.1% -2.2% -1.1% 7.3% 8.6% 8.6% 9.0% 9.4%

Adjusted FCF (Numis) 193 213 208 83 180 126 115 300 367 327 354 394 427
- margin % 7.1% 7.5% 7.1% 2.6% 5.4% 3.4% 2.9% 8.3% 7.7% 5.9% 6.1% 6.4% 6.6%

Numis Securities Limited is authorised and regulated by the Financial Conduct Authority.
Rationalisation, elevation, transformation A member of the London Stock Exchange. Incorporated in England and Wales. Registration No. 02285918 13
Capital Allocation
£1.7bn FCF re-invested since FY15. Group generating >£300m FCF p.a. which would add HSD to earnings growth

Frasers Group Capital allocation FY15-22 Frasers Group Investment Holdings

FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 Oct-22
1,600 JD Sports 11.8% 9.1%
351 Debenhams 11.2% 10.5% 16.8% 29.7% 29.9%
1,200 MySale 4.8% 4.8% 4.8% 4.8% U/O
333 Findel / Studio Retail 19.0% 29.9% 29.9% 36.9% 36.9% 36.9% 35.6%Acquired

800 1,678 Iconix 11.5% 11.4% 8.9% 6.4% 4.8%

House of Fraser 11.1% 11.1% Acquired
724
400
1,022 795 French Connection 11.2% 27.0% 26.1% 26.1%

Finish Line 7.9% 8.8%

0 -60 Dicks Sporting Goods 2.3%
514 193 -257
13 GAME Digital 25.4% 38.5% Acquired
-400
FY15 Net Adj FCF (ex Growth WC (ex Net Property Buyback Proceeds on Purchase of Purchase of Other FY22 Net Goals Soccer 18.9% 18.9%
cash growth capex provisions, investment disposals (ex listed subsidiaries / cash (ex
Hugo Boss 0.2% 5.1% 2.1% 4.3%
capex) credit property) investments associates customer
Mulberry 12.5% 26.1% 36.8% 36.8%
receivables) receivables)

N Brown 4.5%
ASOS 5.1%

Numis Securities Limited is authorised and regulated by the Financial Conduct Authority.
Rationalisation, elevation, transformation A member of the London Stock Exchange. Incorporated in England and Wales. Registration No. 02285918 14
Initiation, Buy £10
Applying a sector average 8.0% Cal-24 FCF Yield

Peer valuation table Frasers Group long-term PE

PE EV/EBIT EV/Sales FCF Yield % SALES CAGR EPS CAGR EBIT margin
% 25
2023 2024 2023 2024 2023 2024 2023 2024 2022-24 2022-24 2023e
Frasers @ £10 12.1 10.1 8.4 7.0 0.8 0.7 7.9% 9.2% 5.7% 13.7% 9%
20
B&M 11.2 10.8 10.0 9.6 1.0 1.0 9.0% 9.2% 5.6% -1.1% 10%
Dunelm 13.7 12.8 11.1 10.0 1.3 1.2 8.7% 9.1% 4.2% -0.8% 12%
Games Workshop 18.2 17.4 12.8 12.0 5.1 4.8 7.2% 7.5% 7.5% 3.7% 40% 15
JD Sports 9.2 8.5 4.3 3.6 0.4 0.4 10.9% 11.8% 5.8% 3.8% 11%
Kingfisher 9.4 8.7 8.5 8.2 0.5 0.5 6.1% 7.5% 0.8% -2.8% 6%
Next 11.0 10.3 9.7 9.3 1.7 1.6 6.4% 8.2% 1.5% -0.2% 17% 10

Pets at Home 14.1 12.5 9.1 7.9 1.0 0.9 6.9% 7.9% 4.9% 6.0% 11%
Watches of Switzerland 16.5 14.5 11.7 10.0 1.4 1.2 5.5% 5.9% 14.5% 15.0% 12%
5

UK Retailers 12.5 11.7 9.8 9.4 1.2 1.1 7.0% 8.1% 5.3% 1.8% 11.4%
Academy Sports & 5.9 5.3 4.3 3.7 0.5 0.5 14.7% 16.0% 5.8% 8.6% 12% 0
Outdoors

2021
2020

2022
2007

2008

2009

2010

2011

2012

2013

2014

2016

2017
2015

2018

2019
Dicks Sporting Goods 8.4 7.8 6.0 5.3 0.7 0.6 14.1% 11.2% 2.3% 4.3% 11%
Foot Locker 7.9 7.4 4.7 4.7 0.3 0.3 11.9% 10.5% -1.5% -3.4% 7%
Hibbet 5.8 5.4 n/a n/a n/a n/a 17.4% 16.0% 4.3% 6.9% 10% Frasers Group long-term PE
US Sporting Goods 7.0 6.5 5.0 4.6 0.5 0.5 14.5% 13.4% 2.7% 4.1% 10.1%
Retailers
Valuation (Calendar CY23e CY24e CY25e
Adidas 23.7 16.7 18.6 14.0 1.1 1.1 4.6% 6.1% 6.7% 57.8% 6% year)
Anta Sports 23.6 19.4 15.4 12.7 3.4 2.8 5.4% 6.1% 17.3% 22.9% 22%
Callaway Golf 24.4 20.7 14.2 11.4 1.3 1.1 4.2% 5.8% 9.6% 7.7% 9% P/E 11.6 10.2 8.7
Lululemon 31.6 27.2 22.3 19.0 5.0 4.3 2.5% 2.6% 13.9% 16.0% 22% EV/Sales 0.8 0.7 0.6
Nike 30.6 24.8 25.6 21.0 3.2 2.9 3.0% 3.9% 7.8% 13.8% 12% EV/EBIT 8.4 7.0 5.8
Puma 19.4 15.3 10.8 8.5 0.8 0.7 4.6% 6.5% 9.6% 18.0% 8%
EV/EBITDA 5.4 4.6 3.9
Under Armour 16.2 13.3 4.5 3.6 0.3 0.2 9.4% 15.3% 4.6% 16.0% 6%
Sporting Goods brands 24.2 19.6 15.9 12.9 2.1 1.9 4.8% 6.6% 9.9% 21.7% 12.2% EV/NOPAT 11.0 9.4 7.8
FCF yield (levered) 7.2% 8.3% 9.8%
FCF yield (unlevered) 7.7% 9.1% 11.0%

Numis Securities Limited is authorised and regulated by the Financial Conduct Authority.
Rationalisation, elevation, transformation A member of the London Stock Exchange. Incorporated in England and Wales. Registration No. 02285918 15
Key debates / pushbacks

• Is the business actually changing or is it all PR?

• Is there any evidence of Elevation? Have brand relationships really strengthened?

• What’s the risk from normalisation in demand, particularly at Flannels?

• What’s the rationale behind all the acquisitions e.g. Studio Retail Group, Missguided etc?

• What’s the influence of Mike Ashley?

• How has profitability rebounded so quickly?

• What’s the underlying cash generation?

• What are you expecting at the Interims?

Numis Securities Limited is authorised and regulated by the Financial Conduct Authority.
Rationalisation, elevation, transformation A member of the London Stock Exchange. Incorporated in England and Wales. Registration No. 02285918 16
Analyst Certification and Disclosure
Regulatory Notice & Disclaimer
General Disclosure
The research analyst who prepared this research report was Georgios
Pilakoutas. The research analyst is not registered/qualified as a
research analyst with FINRA. The research analysts who prepared this
investment recommendation receives compensation based upon
various factors (such as the general perception of the analyst's ability
and commitment to their analytical work) and upon the overall
revenues including the investment banking revenues and trading
revenues of Numis and/or one or more of its affiliates. No part of the
content of this research report may be copied, forwarded or
duplicated in any form or by any means without the prior consent of
Numis and Numis accepts no liability whatsoever for the actions of
third parties in this respect. Numis research is being produced in
accordance with COBS 12.2 as Non-Independent Research.
The following disclosures are addressed to EEA-based recipients
This research report is distributed by Numis Europe Limited ("NEL"), to
EEA clients as third-party research. NEL is an investment firm
authorised and regulated by the Central Bank of Ireland ("CBI"), with its
registered address at Riverview House, 21-23 City Quay, Dublin 2, D02
FP21, The Republic of Ireland.This research report was produced by
Numis Securities Limited ("Numis") on the date and time set out on
page 1 of this research report. Numis is an investment firm authorised
and regulated by the UK Financial Conduct Authority.NEL and Numis
are group subsidiaries of Numis Corporation Plc.The disclosures made
by Numis under the section below titled "The following disclosures are
addressed to non-US-based recipients." and specifically the sub-
heading "Additional Disclosures" apply to both Numis and NEL.
Therefore a reference to Numis should be read as a reference to both
Numis and NEL, and a reference to the FCA should be read as a
reference to both the FCA and CBI.
Rationalisation, elevation, transformation
The following disclosures are addressed to US-
based recipients.
Analyst Certification
Important Disclosure
This research report has been prepared and approved by Numis
Securities Limited ("Numis"), a securities dealer in the United Kingdom.
Numis is not a registered brokerdealer in the United States and
therefore is not subject to U.S. rules regarding the preparation of
research reports and the independence of research analysts. This
research report is provided in the United States for distribution solely
to "major U.S. institutional investors" in reliance on the exemption from
registration provided by Rule 15a-6 of the U.S. Securities Exchange Act
of 1934, as amended. Any recipient of this research report wishing to
effect any transaction to buy or sell securities or related financial
instruments based on the information provided in this research report
should do so through a FINRA registered US broker dealer. Under no
circumstances should any recipient effect any transaction to buy or
sell securities or related financial instruments through Numis.
Numis Inc. accepts responsibility for the contents of this research
report, subject to the terms set out below, to the extent that it is
delivered to a U.S. person other than a major U.S. institutional investor.
Numis, Numis Inc. and/or their affiliates, directors, officers, and
employees may have or have had interests, or long or short positions,
and may at any time make purchases or sales as a principal or agent
of the subject companies mentioned or referred to in this report.
Additional Disclosure
This Numis Securities Limited ("Numis") research report is for
distribution only under such circumstances as may be permitted by
applicable law. This research report has no regard to the specific
investment objectives, financial situation, or particular needs of any
specific recipient, even if sent only to a single recipient. This research
report is offered solely for informational purposes and is not to be
construed as a solicitation or an offer to buy or sell securities or
related financial instruments, nor is it to be construed as a
recommendation for Numis to effect any transaction to buy or sell
securities or related financial instruments on behalf of any recipient.
There is no express or implied understanding between Numis or Numis
Securities Inc. ("Numis Inc.") and any recipient of this research report
that Numis will receive any commission income in connection with this
research report. The securities that may be described in this research
report may not be eligible for sale in all jurisdictions or to certain
categories of investors. This research report is based on information
believed to be reliable, but it has not been independently verified and
is not guaranteed as being accurate. This research report is not
guaranteed to be a complete statement or summary of any
securities, markets, reports or developments referred to in this
research report.
Any statements or opinions expressed in this research report are
subject to change without notice and Numis is not under any
obligation to update or keep current the information contained herein.
All statements and opinions expressed in this research report are
made as of the date of this research report and are not held out as
applicable thereafter. Neither Numis nor any of its directors, officers,
employees, or agents shall have any liability, however arising, for any
error, inaccuracy or incompleteness of fact or opinion in this research
report or lack of care in this research report's preparation or
publication; provided that this shall not exclude liability to the extent
that this is impermissible under the law relating to UK financial
services.
Investing in any non-U.S. securities or related financial instruments
(including ADRs) discussed in this research report may present certain
risks. The securities of non-U.S. issuers may not be registered with, nor
be subject to the regulation of the U.S. Securities and Exchange
Commission. Information on such non-U.S. securities or related
financial instruments may be limited. Foreign corporations are
typically not subject to audit and reporting standards and regulatory
requirements comparable to those in effect within the United States.
Past performance is not an indication or guarantee of future
performance and no representation or warranty, express or implied, is
made by Numis with respect to future performance. The value of any
investment or income from any securities or related financial
instruments discussed in this research report is subject to volatility
and can fall as well as rise. Investors may not get back the full amount
they originally invested. The value of any investment or income from
any securities or related financial instruments discussed in this
research report denominated in a currency other than U.S. dollars is
subject to exchange rate fluctuations that may have a positive or
adverse effect on the value of or income from any securities or related
financial instruments discussed in this research report.
Numis Securities Limited is authorised and regulated by the Financial Conduct Authority.
A member of the London Stock Exchange. Incorporated in England and Wales. Registration No. 02285918
The following disclosures are addressed to non-
US-based recipients.
Numis regards this document as an investment recommendation. It
has been approved under part IV article 19 of The Financial Services
and Markets Act 2000 (Financial Promotion) Order 2005 (the “FPO”) by
Numis Securities Limited (“Numis”) for communication in the United
Kingdom only to investment professionals as that term is defined in
article 19(5) of the FPO. Its contents are not directed at, may not be
suitable for and should not be relied on by anyone who is not an
investment professional including retail clients. Numis does not
provide investment advisory services to retail clients. This investment
recommendation is not directed at you if Numis is prohibited or
restricted by any legislation or regulation in any jurisdiction from
making it available to you. You should satisfy yourself before reading it
that Numis is permitted to provide investment recommendations to
you under relevant legislation and regulations. This investment
recommendation is not an offer or a solicitation to buy or sell any
security. It does not constitute a personal recommendation and
recipients must satisfy themselves that any dealing is appropriate in
the light of their own understanding, appraisal of risk and reward,
objectives, experience, and financial and operational resources. It has
not been prepared in accordance with legal requirements designed
to promote the independence of research. Non independent research
is not subject under the Markets in Financial Instruments Directive
(“MiFID”) to any prohibition on dealing ahead of the dissemination of
research. However, Numis is required by the FCA to have policies in
place to identify and manage the conflicts of interest which may arise
in its production, which include preventing dealing ahead. The prices
of the investments referred to in this investment recommendation and
the income from them may go down as well as up and investors may
realise losses on them. Neither past performance nor forecasts are a
reliable indicator of future results. Numis accepts no fiduciary duties to
the reader of this investment recommendation and in communicating
it Numis is not acting in a fiduciary capacity. Neither Numis nor any of
its directors, officers, employees, or agents shall have any liability,
however arising, for any error, inaccuracy or incompleteness of fact or
opinion in this research report or lack of care in this research report's
preparation or publication; provided that this shall not exclude liability
to the extent that this is impermissible under the law relating to UK
financial services.
All statements and opinions are made as of the time and date on the
face of this document and are not held out as applicable thereafter.
Numis makes no commitment to any planned frequency of updates
to investment recommendations. Investment recommendations carry
the date and time of dissemination. In the absence of contrary words,
Numis considers that an investment recommendation is only
completed at the point at which it is disseminated. Where a price is
quoted in an investment recommendation it will generally, in the
absence of contrary words, be the latest practicable price prior to
distribution. Unless otherwise stated, prices in this investment
recommendation are derived from quotations on the London Stock
Exchange. A list of significant items which could create a conflict of
interest and other material interests in relation to investment
recommendations, together with Numis’s policy for managing such
conflicts of interest, is set out on the Numis website
(www.numis.com/Legal-and-Regulatory).
Analyst Certification and Disclosure

Numis or one or more of its associates or a director or an employee of Valuation, Key Assumptions and Risks
Numis or of an associate may from time to time have a position, or
may have undertaken or may undertake an own-account transaction, In longer investment recommendations, typically over four pages,
in a security referred to in this document or in a related security. Such details relating to valuation (including material information about
a position or such a transaction may relate to the market making proprietary models), key assumptions and risks will typically be
activities of Numis or to other activities of Numis. included in the document. For other investment recommendations
please refer to www.numiscorp.com/x/research-sector.html for this
Numis or one or more of its associates may from time to time have a information, the relevant company section of the Numis website.
broking, advisory or other relationship with a company which is the
subject of or referred to in this investment recommendation, including
acting as that company’s official or sponsoring broker and providing Ratings Key
corporate finance or other financial services. It is the policy of Numis to A target price is set with a 12 month horizon from the time of
seek to act as corporate adviser or broker to many of the companies publication. In making a rating the analyst should compare their
which are covered by the Research Department. Accordingly target price with the actual share price and then make a rating
companies covered in any investment recommendation may be the derived from the percentage thus calculated:
subject of marketing initiatives by the Investment Banking
Department.
Numis acts as a market maker (as defined in point (7) of Article 4(1) of
Directive 2014/65/EU) in the subject company of this report.
Additionally, at any time Numis may have a long or short position in
the companies mentioned in this investment recommendation, and
may have received customer orders to buy or sell instruments in the
companies mentioned in this investment recommendation. If Numis
holds a long position of >0.5%or a short position of <-0.5% in the subject In certain publication types (namely response and periodic pieces),
company of an investment recommendation, this is separately where the primary content is not focussed on a recommendation,
disclosed. consistency of recommendation and target price is not required
A company covered in this investment recommendation may have
paid for an analyst’s reasonable expenses to visit their premises or
offered modest hospitality or entertainment; further details are
available on request.
Unless otherwise clearly specified in this document, the author(s) of
this document does not own a long or short position in the issuer,
whether received or purchased before or subsequent to a public
offering of such shares.
Investment recommendations will specifically identify sources of
information for material facts, where these are not regulatory
company announcements and published company financial
documents. In those cases (but not otherwise) where the subject
company has seen a draft of the investment recommendation and
has suggested factual amendments which are incorporated by the
analyst, this will be noted on the investment recommendation.
The archive of investment recommendations, available to all clients
who normally receive Numis investment recommendations, is
available on the Numis website (www.numiscorp.com/x/research-
sector.html).
Numis accepts no responsibility whatever for any failure by a person
resident outside the United Kingdom to observe the foregoing. No part
of the content of any research material may be copied, forwarded or
duplicated in any form or by any means without the prior consent of
Numis and Numis accepts no liability whatsoever for the actions of
third parties in this respect.
Numis believes that its research service as a whole amounts to
‘substantive research’ as defined by the FCA.

Numis Securities Limited is authorised and regulated by the Financial Conduct Authority.
Rationalisation, elevation, transformation A member of the London Stock Exchange. Incorporated in England and Wales. Registration No. 02285918 18
 Offices

London New York Dublin

45 Gresham Street 575 Fifth Avenue Riverview House 21-23

London New York City Quay
EC2V 7BF NY 10017 Dublin 2

+44 (0)20 7260 1000 +1212 277 7300 +353 1574 7210

Important Notice
This document is a summary of an oral presentation made by Numis, a wholly owned subsidiary of Numis Corporation Plc,
and sets out certain information relating to Numis with a view to explaining certain services provided by Numis.
This document is communicated by Numis and is, for the purposes of the Financial Services and Markets Act 2000 and the
rules of the Financial Conduct Authority, a financial promotion of Numis’ services but not of any particular investment. Whilst
it contains certain information in relation to Numis and to certain clients of Numis, this is intended to promote Numis’
professional services only and is not intended to promote investment in Numis’, clients’ or any other securities or any other
investments. This document does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer
to purchase or subscribe for, any shares in Numis Corporation Plc nor shall it or any part of it form the basis of or be relied
on in connection with any contract therefore.

numis.com Numis Securities Limited is authorised and regulated by the Financial Conduct Authority.
A member of the London Stock Exchange. Incorporated in England and Wales. Registration No. 02285918 19