Chris Wootton, the CFO of Frasers Group, shares insights on the company’s strategic positioning amidst the current luxury market challenges.
- Despite a reported 13.1% rise in adjusted profit before tax, the company faces revenue dips in key segments, particularly in its UK Sports and Premium Lifestyle divisions.
- Wootton expresses optimism about the cyclical nature of the luxury market, highlighting strategic investments in digital platforms and store estates as key to capturing future demand.
- Recent acquisitions, including Matches and Coggles, reflect Frasers’ strategy to enhance its premium offerings, although challenges remain.
- Looking ahead, Frasers Group anticipates growth in international retail and the eventual rebound of the luxury market as primary drivers.
This morning, Frasers Group announced a significant 13.1% increase in adjusted profit before tax, amounting to £544.8 million for the fiscal year ending April 28, 2024. This gain comes even as the company experiences a dip in revenue, driven by its ongoing ‘elevation strategy.’ Specifically, the UK Sports Retail segment, which encompasses brands such as Sports Direct and Everlast Gyms, recorded a 3.3% decrease in revenue and comprises 51.7% of total group sales.
The company’s Premium Lifestyle division, representing 21.7% of total group revenue, saw a 1.2% decline in sales. Frasers attributes this downturn to strategic House of Fraser store closures and a generally sluggish luxury market. It is here that CFO Chris Wootton remains assured of a recovery, referring to the luxury market as ‘cyclical’ and pointing to robust investments made in their store network and digital capabilities. ‘We are in a really strong place with our Flannels business, so when the market turns, [we can capture that demand],’ he emphasized.
Wootton also noted that while the demand for luxury products might not recover in the current fiscal year, Frasers Group is positioning itself for an eventual upturn, which could extend beyond the fiscal year 2026.
In line with its strategy to enhance its premium portfolio, Frasers Group has been proactive in acquisitions. In April, it acquired the brand name and intellectual property of Matches for £20 million, following its administration. It further expanded by acquiring the high-end retailer Coggles from THG. Regarding Matches, Wootton acknowledged, ‘We are investing in the [Frasers Group] business and investing in our Flannels’ proposition. That includes acquisitions. Matches was very much struggling before we picked it up, so we were aware that there were downside risks.’
Although Matches’ operations, including its website and stores in Mayfair, Marylebone, and Wimbledon, have ceased, Frasers hasn’t eliminated the prospect of a relaunch. Wootton mentioned, ‘We are still reviewing options, we still have the IP. It was a great brand and had a huge customer base, so things could be done with it if we so choose.’
The company’s revenue distribution across its divisions shows a nuanced business model. While UK Sports retail accounts for the majority at 51.7%, international retail contributes a significant 23.3% with a revenue increase of 3.3%. Their property and financial services divisions experienced changes, with property seeing a remarkable rise of 101.4%. Despite a decrease in financial services revenue by 11.2%, the overall outlook suggests targeted growth in specific areas.
Frasers Group’s strategy extends to the acquisition of premium independent retailers within the UK, capturing brands like Aphrodite, John Anthony, and Zee & Co. This aligns with their long-term vision of transforming from a collection of boutiques to becoming a national retailer. Wootton stated, ‘If they are in the right locations, I can see more of it happening, but we will take on a case-by-case basis.’
Looking forward, Chris Wootton identified international retail and premium lifestyle as the sectors expected to drive growth in the medium to long term. ‘We are looking at international opportunities. It’s a big growth opportunity for us, so that is something you will see grow,’ he explained. He also reiterated that although the luxury market is currently in a downturn, its recovery could represent a substantial future opportunity.
Frasers Group remains strategically poised to capitalize on future growth opportunities in the luxury market through sustained investments and strategic acquisitions.
