Frasers Group has warned it could take a hit in excess of £200m due to the Covid-19 restrictions – double its previous estimate in February.
The owner of House of Fraser, Flannels, Evans Cycles, Jack Wills and Sports Direct, stated that further restrictions are “almost certain”, adding that a write-down against freehold values and other non-cash impairments will be required.
In an announcement to the London Stock Exchange, the group noted that it is continuing to assess the pandemic’s potential impact on asset values.
“In our ongoing assessment we note the continuing government adviser pronouncements regarding ‘third waves’ and normality being ‘some way off’, meaning further restrictions are in our view almost certain.
“We also note the Covid-affected experiences, estimates and judgments from other leading retailers.”
The company had warned in February that it expected to see a £100m hit – on top of impairments included in half-year results.
Frasers is planning to reopen much of its estate from Monday, as non-essential retailers are allowed to welcome back customers in England.
The group, controlled by Mike Ashley, has been critical of the extension by the Chancellor to the business rates holiday and the restrictions it places on how much can be saved for retail chains.
He has also been eyeing potential takeover opportunities throughout the crisis, showing interest in the collapsed Debenhams and Peacocks brands, although administrators have found that offers have tended to be too low to accept.
Susannah Streeter, senior markets analyst at Hargreaves Lansdown, commented that it’s the make up of Frasers Group’s retail portfolio which puts it under particular pressure.
“Although it has a significant online presence to offset some of the lost sales, it also has a large footprint of stores in high streets which have fallen out of favour with shoppers, compared to retail parks, even when restrictions have eased.”
While Frasers Group sounded the alarm bell, it didn’t manage to dampen investor enthusiasm, with shares rising 1%. On the FTSE 100, JD Sports, Next and Burberry Group were also among the top risers in this morning’s trade.
“While the risks of a potential third wave, caused by new strains of the virus are lingering like dark clouds in the distance, for now, make hay while the sun shines appears to be the sentiment dominating the retail sector,” she added.
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