Frasers Group launches attack on failed online retailer following takeover deal

Frasers Group, owned by businessman Mike Ashley, has launched a coruscating attack on the management of Accrington firm Studio Retail Group (SRG) which it has acquired out of administration.

And it called for tighter governance by financial and government authorities to protect businesses and jobs.

Frasers Group completed a £26.8m takeover of SRG which appointed administrators yesterday, having warned it would do so on February 14.

It blamed its failure to persuade its bankers to provide £25m to help it overcome a surplus stockholding which it said required additional working capital funding while it was sold through to customers.

Frasers Group, SRG’s biggest shareholder, acquired the business from joint administrators from Teneo Financial Advisory.

But this afternoon (February 25) it issued a statement to the stock exchange in which it said SRG should have taken steps much earlier to protect it from failure, likening its demise to that of department store chain Debenhams which collapsed in December 2020.

Frasers said SRG was in need of a strategic review to protect shareholder value and wrote to the company in autumn 2020 calling for action. It said: “Although Frasers tried to remain a supportive shareholder it indicated to SRG management a number of concerns around areas such as accounting estimates and judgements and whether management were taking a sufficiently conservative view. This led to Frasers voting against the chief financial officer’s re-election in 2019 (albeit he was re-elected with a vote of 58.06% in favour).

“SRG is another example of a business which has buried its head in the sand whilst the world around it changed. Furthermore, it is clear that the fundamentals of its business were, at best inadequately scrutinised by its board and/or advisors to the business, or at worst, deliberately concealed as the business entered its death spiral.”

It added: “In the opinion of Frasers the public statements issued by SRG to the effect that a loan of £25m would have been sufficient to preserve the group as a going concern will prove to be a gross underestimation of the scale of the issues facing the business.”

It said a UK corporate governance regime “that countenances sudden and unaccountable failure of businesses, viable one week, and irredeemably broken the next, entirely without sanction or censure of those involved, is clearly unfit for purpose and in need of urgent reform”.

Frasers said proper regulation should ensure that businesses and jobs do not simply disappear overnight, damaging lives, eroding shareholder value, and tarnishing the reputation of the UK business system as a whole.

The statement said: “Frasers does not see the failures of listed public companies such as Debenhams, Goals and SRG as isolated incidents, but rather as manifestations of systematic governance failures and a lack of corporate and individual accountability.”

It said it should be an urgent priority of government to increase the meaningful regulation of UK business.

This should include fully investigating the collapse of all listed businesses, and imposing fines and/or criminal penalties on any individuals found to have been complicit in, or responsible for, any wrongdoing which contributed to their failure.

Frasers called for increased resources for the likes of the Financial Reporting Council/Audit Reporting and Governance Authority, and Financial Conduct Authority to properly police the regime and act decisively as a deterrent to others.