18th Jul 2024 15:04
(Alliance News) - Frasers Group PLC on Thursday, though perhaps best known for its ownership of Sports Direct and House of Fraser, stands to benefit from its diversified footing in the retail space when consumer confidence perks up.
Frasers shares rose 11% to 909.40 pence each in London on Thursday afternoon.
In the year that ended April 28, pretax profit fell 21% to GBP507.0 million from GBP638.0 million the previous year, as revenue slipped 0.9% to GBP5.54 billion from GBP5.59 billion.
Adjusted pretax profit showed a 13% increase to GBP544.8 million from GBP481.8 million, at the top end of the company's GBP500 million to GBP550 million guidance range. Reported pretax profit declined to GBP507.0 million from GBP638.0 million.
It said reported profit fell on a "decrease in foreign exchange gains, non-cash fair value movements on equity derivatives and the non-repeat of exceptional gains". Those exceptional gains largely related to the gain made on businesses bought from JD Sports Fashion PLC. It posted an exceptional gain of GBP97.1 million last year.
Looking ahead, Frasers guided adjusted pretax profit of GBP575 million to GBP625 million in financial 2025, meaning an increase of at least 5.5%.
Chief Executive Michael Murray said: "This has been a break-out year for building Frasers' future growth. As well as delivering a strong trading performance, particularly from Sports Direct, we made significant progress with our Elevation Strategy. We expanded our retail ecosystem, establishing valuable partnerships with new brands...We invested in group-wide operational efficiencies in warehouse automation and digital infrastructure, which we expect to yield a tangible impact as early as FY25."
The Elevation Strategy saw the company onboard new brand partnerships with North Face and Columbia.
UK Sports accounted for 52% of the company's revenue during the year, with Sports Direct offsetting planned revenue declines across Game UK and Studio Retail.
"The sport industry is not slowing down; high consumer demand, coupled with our unique proposition continues to drive profitable growth for the division," the company said.
IG analyst Chris Beauchamp said retailers have "weathered the storm of inflation and squeezed consumer spending" recently, and have a better outlook to look forward.
"Frasers' position across the spectrum of consumer spending means it is well-placed to benefit from a broad upturn in spending," Beauchamp added.
Frasers owns the House of Fraser department store chain and the Sports Direct sporting retail goods seller. In addition, it owns Flannels, which sits more towards the luxury side of the retail spectrum, and clothing brand Jack Wills.
Shore Capital Markets analyst Clive Black commented: "How does one describe Frasers succinctly? Multi-faceted, multi-asset, multi-investment.., the 'multi-retailer'. Distinctive and a rich history, it is a growing business whatever way one cuts it and whilst not everyone's cup of tea for a variety of reasons, we expect ongoing growth to persist and for Frasers to be more not less relevant in the future."
By Eric Cunha, Alliance News news editor
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