Frasers Group shares fell by over 6% on Tuesday after RBC Capital Markets cut its recommendation on the UK sporting goods and retail group from "sector perform" to "underperform," citing a share price that has risen ahead of what the broker considers fair value following a 12% year-to-date gain.
Despite the downgrade, RBC raised its price target to 750 pence from 720 pence. The bank said that target reflects an average of discounted cash flow (DCF) and sum-of-the-parts (SOTP) approaches. On RBC’s DCF work, the valuation equates to roughly 712 pence per share using a 9% weighted average cost of capital and a 1% terminal growth rate. The SOTP analysis delivers a higher implied value of about 789 pence per share.
"The shares have now run slightly ahead of our fair value and we see more upside in several other stocks," RBC said in its note explaining the rating change.
RBC also nudged up its adjusted earnings per share forecasts for Frasers. The broker raised fiscal year 2026 adjusted EPS to 95.6 pence from 93.6 pence and boosted the fiscal year 2027 estimate to 103.7 pence from 100.8 pence, citing the impact of share buyback activity.
Frasers has recently announced a new £70 million buyback programme, following a £70 million programme announced in December 2025. RBC said the new programme is expected to commence on June 16.
On the operating front, RBC models fiscal year 2026 revenue of £5.19 billion, a rise of 5.4% year-on-year, while underlying pre-tax profit is forecast at £555 million, a decline of 0.9%.
The broker’s sector breakdown highlights that UK Sports Retail accounts for roughly half of group revenue and profit. RBC projects that UK Sports Retail will fall around 5% year-on-year in fiscal year 2026, with a more stable trend expected in fiscal year 2027.
Corporate activity is central to RBC’s analysis. Frasers submitted a voluntary public takeover offer for Hugo Boss last week at €38 per share. That price corresponds to about 73.9% of the share capital that Frasers does not already own and implies a cost to Frasers of approximately £1.70 billion.
RBC calculated that the Hugo Boss transaction would be modestly accretive to earnings per share at the announced price but would increase Frasers’ net debt to EBITDA leverage from roughly 1.3 times to about 2 times. RBC cautioned that Frasers may need to raise its bid to secure full ownership, noting that the initial offer represented only a 4% premium to the pre-announcement share price. "We see potential for Frasers to have to pay more to secure 100% of BOSS," Chamberlain wrote.
In parallel, Frasers put forward a nil-premium takeover bid for Australia’s Accent Group at AUD0.65 per share for the 77.1% of the company it does not already own, a move that implies a cost near £166 million. RBC’s team covering Accent expects Frasers may need to offer a premium to obtain shareholder acceptance.
RBC’s note also highlights the shifting composition of Frasers’ sales. International Retail now represents close to 30% of group sales, up from approximately 20% in fiscal year 2025. The bank applies a conservative valuation to the international segment, using 0.3 times fiscal year 2027 enterprise value to sales, a reflection of what it describes as a mixed international track record.
To convey the range of outcomes it sees for the stock, RBC published downside and upside scenarios. The downside case, at 400 pence, assumes a long-term sales compound annual growth rate of about 1% and a long-run operating margin declining to roughly 8%. The upside scenario, at 1,000 pence, assumes a 5% long-term sales compound annual growth rate and an operating margin nearer 13%.
Given the combination of buybacks, proposed acquisitions and the broker’s valuation work, RBC’s recommendation reflects a view that Frasers’ share price had moved ahead of the broker’s assessment of fair value even as near-term earnings estimates received modest upward revisions.
Investors and analysts will likely weigh the trade-off the bank lays out: potential EPS accretion from strategic deals versus a higher leverage profile and the possibility that Frasers pays more than initially offered to complete acquisitions.