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Frasers Group, owner of UK retailer Sports Direct, sounded the alarm on profits on Thursday, blaming weak consumer confidence around the “damaging” Budget and sending shares down more than 12 per cent.
The retailer said it now expected to make adjusted profit before tax of between £550mn and £600mn for the year, slightly lower than its previous guidance of £575mn to £625mn.
The company said consumer confidence was weaker and trading was tougher due to the recent Budget.
Frasers, which will be relegated from the FTSE 100 this month following the latest reshuffle, expects to take a hit of “at least £50mn” going into the next financial year as a result of changes to employers’ national insurance announced by chancellor Rachel Reeves in October as well as an increase in the national living wage from April.
Chief executive Michael Murray, son-in-law of majority owner Mike Ashley, called the fiscal event “damaging” and said the group would seek to mitigate the impact on profits and consumers, although he could not rule out price increases.
“Everyone’s looking at everything,” he said, referring to the various cost saving options that could be pursued.
Finance chief Chris Wootton called Frasers’ ejection from the FTSE 100 “disappointing”, adding: “We have to focus on delivering what we set out to deliver and hopefully the share price looks after itself.” The company’s market capitalisation was just under £3bn on Thursday after shares fell to 651p, from 886p at the start of the year.
The retailer, which started life as a single store in Maidenhead in 1982, posted an 8.3 per cent fall in group revenue to £2.5bn for the six months to October 27, while adjusted profit before tax — its preferred metric — fell to £299.2mn from £303.8mn during the same period last year.
Reported pre-tax profits from continuing operations were down by a third to £207.2mn.
Andrew Wade, an analyst at Jefferies, said despite the trading and operational headwinds following the Budget, “we are encouraged by the group’s strong strategic progress, particularly overseas, and retain our positive stance”.
Since he joined as chief executive in 2022, Murray has sought to modernise Frasers’ stores and improve relationships with suppliers such as Nike to be able to sell the most in-demand products.
He has also sought to bolster the retailer’s so-called premium lifestyle business, which includes upmarket chain Flannels.
Frasers has remained highly acquisitive, buying other businesses outright or building stakes in other companies such as online fast-fashion retailers Boohoo and Asos. It is embroiled in a bitter battle with the former over the performance of the business and the composition of its board. Frasers owns about 28 per cent of Boohoo.
Separately, on Wednesday Kent and Manchester Police confirmed they had launched an investigation into claims of stalking of several executives of Boohoo, first reported by the Times. The identity of the alleged perpetrators is unknown.
The UK’s Information Commissioner’s Office also confirmed it had received a complaint from Boohoo that surveillance equipment was discovered outside the head office of the Manchester-based retailer.
