23rd Jun 2022 18:43
(Alliance News) - Analysts at Liberum on Thursday said Frasers Group PLC should take heart from strong annual results from retailing peer JD Sports Fashion PLC.
The broker added that going forward, Frasers could be "more resilient" to economic woes than JD Sports, due to its lesser exposure to the athleisure sector.
Liberum rates Frasers at 'buy' with a 900 pence price target. Frasers shares closed 0.3% higher at 630.62p each in London on Thursday.
"Yesterday's results from JD Sports gave a positive read across for Frasers and our view that it should deliver a robust performance over the coming months," the broker said.
For the year ended January 29, the FTSE 100 listed firm doubled its pretax profit to GBP654.7 million from GBP324.0 million the year prior. Pretax profit before exceptional items more than doubled to GBP947.2 million from GBP421.3 million.
This was also more than double the company's previous record pretax profit before exceptional items of GBP438.8 million in its pre-Covid financial year ended February 1, 2020.
The record profit came on revenue that grew 39% to GBP8.56 billion from GBP6.17 billion. Revenue beat Barclays estimates of GBP8.23 billion.
Going forward, the future is bright at Frasers, Liberum added. The company owns Sports Direct, giving it a leading position in the value portion of the UK sporting goods market. It also owns retailer Flannels, giving it access to the luxury goods market.
Both segments should "prove robust", Liberum added.
Liberum added: "The group's sports positioning is helped by its breadth of product, value to premium offering (supported by its 3rd party relationships, which have never been better) and the demise of the competition. Within Flannels, its younger customer demographic could prove helpful, being a cohort which probably largely still lives with parents, may not be the payers of household bills, and are therefore less worried about immediate financial health.
"The group's bottom line should be helped by ongoing cost efficiencies."
Liberum said Frasers could prove more resilient than JD Sports in the face of tough economic conditions, thanks to its more diversified offering.
"We would expect this model to prove more resilient than JD's, given the latter’s greater exposure to athleisure fashionwear which could prove to be more susceptible in a downturn," Liberum explained.
By Eric Cunha; [email protected]
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