Having finally decided last month not to make an offer for Revolution Beauty (REVB:AIM) – in which it owns a minority stake via its 29% holding in online fashion firm Boohoo – retail brand owner Frasers (FRAS) has turned its attention to German luxury brand Hugo Boss (BOSS:ETR).

According to the Financial Times, the Mike Ashley-controlled group, which owns over 25% of the voting rights in the German firm, has waded into the debate about capital allocation, issued a statement last week saying Boss ‘should not pay a dividend at this time’.

While Frasers said it supported the senior management team of Stephan Sturm, chair, and chief executive Daniel Grieder, it urged them to priorotise ‘other value-enhancing measures’ in order to bolster long-term growth and increase the share price in the short term.

Frasers also called on Hugo Boss to redeem all the 1.4 million shares it acquired between 2004 and 2007, and which it has held in treasury ever since, to free up further capital.

The UK group, which has been building its stake in Hugo Boss since 2020 and sells the fashion brand across its stores and online, further indicated it was not averse to increasing its interest over the coming year after chief executive Michael Murray joined the board of the German firm a matter of a few weeks ago.

It certainly has the firepower, having announced last week it had secured a new financing facility allowing it borrow up to £3.5 billion over the next three years.

Hugo Boss declared a €1.4 per-share dividend for 2024, despite the shares losing more than a third of their value from €67.46 to €44.78 while the DAX index gained almost 19% in comparison.

The German firm said it enjoyed ‘an active and constructive dialogue with all shareholders’, and it would present its strategy for profitable growth to investors, along with its capital allocation plans, later this year.

Boss management is currently forecasting group sales of between €4.2 billion and €4.4 billion for this year, compared with €4.3 billion last year, as ‘macroeconomic uncertainty’ is expected to weigh on industry growth.

Group EBIT (earnings before interest and tax) are forecast to be in the region of €380 million to €440 million against €360 million last year and €410 million the year before. 

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