Hugo Boss faces dividend opposition from Frasers

Frasers Group Plc warned Hugo Boss AG that it will vote against any dividends, as the British retailer owned by billionaire Mike Ashley exerts its influence after years of building a stake in the German fashion house.

Hugo Boss’s management should prioritize funding long-term growth and financial flexibility over paying out dividends, Frasers said in a statement late Thursday. It also said the company’s stock is undervalued, and called on Hugo Boss to redeem all its treasury shares.

Shares of Hugo Boss rose as much as 4.2% in morning trading on Friday, with trading volume about 18 times the average for the time of day.

The company, founded by Mike Ashley and formerly known as Sports Direct, is known for acquiring significant stakes in other retailers and using its position to influence board-level decisions. That strategy now appears to extend to Hugo Boss, just weeks after Frasers Chief Executive Officer Michael Murray joined the brand’s supervisory board.

Frasers and Hugo Boss have had a long relationship that includes the British retailer selling the fashion brand’s stock across its stores and online. Ashley’s company holds 25% of voting rights in Hugo Boss, according to a filing last month, with exposure to a further 32% through the sale of put options.

Frasers said it will support Hugo Boss Chief Executive Officer Daniel Grieder and Stephan Sturm, chairman of its supervisory board, in growing the fashion brand. It also said it does not rule out increasing its stake in the company over the next year, subject to market conditions.

In its response, Hugo Boss said it maintains an active and constructive dialog with all shareholders, and appreciates the engagement with Frasers. The company will outline a new strategy at a capital markets day in the fourth quarter, including an evaluation of how capital is allocated to keep aligning the company’s long-term goals with shareholder interests.

Hugo Boss also said that while it has not seen any downside in keeping 1.4 million treasury shares acquired between 2004 and 2007, it is now considering redeeming them as Frasers requested.

Frasers has a history of high-profile clashes with companies in which it held stakes, including with department stores Debenhams and House of Fraser. The business is now run by Murray, Ashley’s son-in-law, and has expanded its premium offering with upmarket outlet Flannels.

Last year, Frasers walked away from an attempted takeover of British handbag maker Mulberry Group Plc but still pushed for a board seat.