Frasers Group has "robust" year, expects ongoing growth, despite higher costs
Frasers Group released its unaudited results for the year to late April on Thursday and there was a lot of information to digest from the giant business, although the company summed it up, talking of “robust trading and strong strategic progress on the Elevation Strategy”.
It was a “record-breaking year” for the group that owns Flannels, Sports Direct, House of Fraser and Jack Wills, among others, with a swing to an adjusted profit before tax of £344.8 million, “despite the significant economic headwinds and well-chronicled challenges across the sector”. One of those challenges included a “significant increase” in its costs.
And while the backdrop remains challenging, it said “this momentum gives us the confidence of achieving adjusted profit before tax of between £450 million and £500 million for the next financial year”.
Looking at the details of the report, excluding acquisitions (such as Studio Retail Limited, or SRL) and on a currency-neutral basis, revenue increased by 31.2%. Reported revenue excluding SRL rose 30.9% to £4.75 billion. Within that, the UK Sports Retail division was up 31.2% at £2.58 billion, largely due to the strong reopening of stores after the last lockdown in March 2021 and the comparison period being impacted by lockdowns.
Its Premium Lifestyle division’s revenue rose 43.6% to £1.05 billion as it opened new Flannels stores, saw continued growth online, and benefited from that buoyant post-lockdown reopening. Flannels is the star of this unit but House of Fraser also saw trading improvements, although it said “business rates in their current form continue to be a significant and disproportionate cost to” the department store chain. CEO Michael Murray repeated his calls to reform the “archaic” rates system.
The European Retail operation advanced by 28.4% to £790 million, boosted by strong growth in Ireland and easier comparisons with the lockdowns in the prior year. But Rest Of World retail was down 1.6% at £150 million, although wholesale and licensing rose 9.7% to £168 million.
The change in fortunes over the course of a year can be seen from the fact that the almost-£345 million adjusted pre-tax profit was up from a loss on that basis of £39.9 million a year earlier. Meanwhile unadjusted profit before tax was £366.1 million, up from a profit of £8.5 million.
As mentioned, the results don’t include acquisitions like SRL and since the period ended, the company has bought even more businesses, notably purchasing Missguided out of administration to give it a ready-made fashion e-tail specialist in the process. As well as that, it has increased its stake in Hugo Boss and bought a stake in MySale. It’s also continued to open new stores.
It all suggests a promising future for the business and in the results statement Murray said that it’s “accelerating” its strategy to “provide consumers with access to the world's best sports, premium and luxury brands by providing a world-leading retail ecosystem… and will continue to work closely with our key brand partners such as Nike, Boss and Stone Island, to align plans”.
Importantly too for a company that has sometimes had difficult relationships with some major brands, he added that “our brand partnerships are deeper and stronger than they have ever been in the group's history. These relationships will allow us to continue improving our product offering and customer experience by creating the best platforms to enable our brands to succeed”.
Murray added that the business has “extensive ambitions to grow the business outside of the UK and will be exploring the potential for further international expansion through acquisitions, joint ventures and organic openings”.
It has already begun to expand its operational capabilities in Europe, with a new development site in Bitburg, Germany being developed. This will have up to 2.4million sq. ft of warehouse and distribution space, handling approximately 300 million units annually to “support growth across continental Europe”.
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