Frasers Group profits soar as Covid-19 restrictions ease but Mike Ashley’s retail giant warns of ‘headwinds’
- Frasers racked up six-month profits of £143.7m, up 70.3 per cent on last year
- The firm is now forecasting full-year profits of between £300m to £350m
- But it warned of ‘well-publicised macroeconomic headwinds on the horizon’
Mike Ashley’s Frasers Group saw six-month profits jump 70.3 per compared to last year, buoyed by the strong reopening of stores after lockdown, its new Flannels stores and online growth.
The sportswear and fashion High Street retail giant racked up profits of £143.7million in the half year to 24 October, as revenues surged 27.6 per cent to £2.34billion.
The brand formerly known as Sports Direct has gobbled up big retail brands ranging from House of Fraser, to Evans Cycles, Game and Jack Wills and is now forecasting full-year adjusted pre-tax profits of between £300million to £350million.
But it cautioned: ‘A number of well publicised macroeconomic headwinds on the horizon’, such as inflationary pressure and supply chain issues, could impact performance, as well as the potential re-emergence of Covid-19 restrictions.
CEO Mike Ashley will hand over the reigns next year after founding the business in 1982
Frasers said its capacity to reach profit targets for the year to 24 April are ‘on the proviso there are no substantial lockdowns imposed in the UK, particularly over the important Christmas period’.
On Wednesday, the Government conformed new rules coming into force next week, including a recommendation of working from home, but no restrictions, other than mask mandates, have yet been put on the retail sector.
Frasers’ strongest performance was demonstrated by its premium lifestyle brands, sales, which rose by 33.6 per cent to £427.9million
The UK sports retail and European retail saw sales climb 27.6 per cent and 13.6 per cent, respectively.
The only business area that did not see revenue growth was rest of world retail, which saw sales decline by 14.9 per cent.
Frasers attributed the decline to ‘Covid-19 related restrictions in Malaysia’, where it operates under the ‘Sports Direct fascia’.
However, Frasers’ rest of world operations were still able to post adjusted profit before tax of £14.3million, up from £7.7million last year, which it attributed to ‘overall operating efficiencies in the US businesses’
Frasers also reported on Thursday that it was able to reduce net debt by a substantial 90.3 per cent to £24.3million, while earnings per share rocketed 70.3 per cent to 229.2p.
Frasers shares were trading 3 per cent higher in early trading to 728.5p.
Incoming CEO and Mr Ashley’s son-in-law Michael Murray
Non-executive chair David Daly said: ‘Unfortunately we still have the shadow of uncertainty cast by the ongoing Covid-19 pandemic, with restrictions including lockdowns returning to parts of Europe and with the emergence of new variants.
‘There are also supply chain risks which to date we have proven resilient to but which must be factored into our future forecasting given these could continue for some time.
‘On top of this there are the well-publicised macroeconomic factors contributing to a likely cost of living squeeze which could impinge on consumers spending plans heading into the new year.’
Founded by Mr Ashley in 1982, Frasers is set for a change of leadership next year as his son-in-law Michael Murray takes charge as CEO.
Independent shareholders revolted in late September over a deal that will hand Murray £100million if Frasers’ share price hits £15 for 30 consecutive trading days in the next four years.
Murray’s early years at the company were also laced with controversy, as he was paid £17.5million as a consultant over six years, and his mother Nicola has also netted £100,000 for ‘design work’.
Frasers shares are up 60 per cent year-to-date and 37.9 per cent above their pre-pandemic peak.
Frasers shares are up 60% year-to-date and well above their pre-Covid peak