Profits at Mike Ashley’s Frasers Group have risen by three quarters, putting the retailer on course for record results — provided that there is not another festive lockdown.
Frasers Group, which includes Sports Direct, House of Fraser and Flannels, said that it expected to make adjusted pre-tax profits of between £300 million and £350 million for the year to April 24, 2022, “on the proviso there are no substantial lockdowns imposed in the UK, particularly over the important Christmas period”.
The guidance, the first given by the group since the Covid-19 outbreak emerged, reveals a dramatic recovery for a retailer that last year made only £5.8 million and the forecast figure would be almost double its pre-pandemic profit of £143 million.
Chris Wootton, 41, chief financial officer, said that Wednesday night’s government order to work from home amid the spread of the latest Omicron coronavirus variant had given him a bit of déjà vu about last year’s Christmas chaos. “I personally don’t think that there would be another Christmas lockdown and [the government] will do their level best to avoid it because otherwise they will get smashed to pieces, but I don’t know what will happen in January,” he said. “The advice has been confused from the start.”
Frasers Group reported a 23.6 per cent increase in sales to £2.34 billion for the six months to October 24, while pre-tax profit rose by 75.3 per cent to £186 million. Adjusted pre-tax profit rose by 61.7 per cent to £186.8 million after stripping out foreign currency impacts, stakes in other businesses and £135.3 million of property writedowns largely associated with House of Fraser, £100 million more than was recorded in 2019.
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“It’s been very good for everyone over the last six months, people have been spending,” Wootton said.
What is now Frasers Group was founded by Ashley, 57, the retail tycoon, with one sports shop in Maidenhead, Berkshire, in 1982. It is now a global business with 815 Sports Direct, Evans and Game shops in Britain, 43 House of Fraser stores, 44 Flannels shops, 56 Jack Wills shops and another 565 sites overseas.
Frasers Group received £23 million of business rates relief during the period, which Wootton said had supported keeping unprofitable House of Fraser stores open and protecting jobs. As that support was withdrawn, Wootton said that there could be further store closures as “rates in their current form continue to be a significant and disproportionate cost to House of Fraser and the last budget did very little to address that”.
However, House of Fraser increased its sales during the period, which Wootton said was thanks largely to the loss of competition after the demise of Debenhams and the closure of 16 John Lewis department stores.
The group’s “premium lifestyle business”, which includes Flannels, House of Fraser and Jack Wills, increased sales overall by a third to £427.9 million, while Sports Direct, the value sports apparel chain, made £1.37 billion after its sales rose by 27.6 per cent.
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Shares in Frasers Group rose by 34p, or 4.8 per cent, to 741p, valuing the business at about £3.7 billion.
