8th Dec 2022 17:33
(Alliance News) - Aided by acquisitions, Frasers Group PLC reported a double-digit rise in interim revenue on Thursday.
The Shirebrook, England-based retailing group owns the Sports Direct, Frasers and Flannels chains, among others.
It said that revenue rose 13% to GBP2.64 billion in the six months that ended October 23, from GBP2.34 billion a year prior - largely thanks to its acquisition.
Excluding acquisitions, revenue fell 3.1%. Frasers explained this was mostly due to a reduction at video game retailer Game UK and a strong comparator the year prior, after shops reopened from lockdown in March 2021.
"Frasers loves an acquisition or three and the purchase of various companies has helped to drive sales over the past year," said AJ Bell's Russ Mould.
"Much more interesting is how profit has shot up, which shows the company is able to make good money from its expanding empire and offer the type of products that consumers are still eager to buy," Mould continued.
The firm's pretax profit jumped 53% to GBP284.6 million from GBP186.0 million. It also reiterated its full-year guidance as a result of its strong performance.
The company expects an adjusted pretax profit of GBP450 million to GBP500 million in its financial year 2023. This would be at least 32% higher than the GBP339.8 million adjusted pretax profit the company posted for the financial year 2022.
For Hargreaves Lansdown's Susannah Streeter, the update from Frasers shows that there are still "deep pockets of resilience" in the fashion retail sector, particularly on ranges viewed as offering value.
"While other department store chains have disappeared, House of Fraser Stores continue to be the lynchpin of shopping centres while Sports Direct shops remain a pull on the high street, helped by the engine of e-commerce sales," she said.
However, Streeter added that it would be unlikely that Frasers would be immune to the "recessionary headwinds whipping up" moving forward.
It was these concerns that sent Frasers' stock price plunging on Thursday, with the stock dropping 9.0% to 809.50 pence at the London equities close.
interactive investor's Victoria Scholar was more optimistic: "The well-documented pressures on the consumer with the cost-of-living crisis squeezing household budgets appear to be dividing the retail sector into either winners or losers with the owner of Sports Direct managing to land itself a position in the winning category thanks to its intelligent strategy to create key partnerships with strong brands."
Russ Mould at AJ Bell described this strategy as a "game plan" to acquire brands or businesses that help to expand its "skillset and customer reach".
"Whether that’s a posh menswear outfit to support Flannels, a credit offering to cater for a certain type of customer or a business that brings with it social media expertise. Frasers is certainly not afraid to try new opportunities," he said.
By Heather Rydings, Alliance News senior economics reporter
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