Frasers Group revises its profit outlook for the year due to significant sales downturn, reflecting increased consumer caution.
- In the first half of the fiscal year, Frasers Group recorded a 33% drop in pre-tax profit, down to £207.2m from £310.2m year-on-year.
- An 8% decrease in sales has been attributed to declining consumer confidence, affecting both premium and sports retail sectors.
- The group anticipates further financial pressures in the upcoming year, forecasting adjusted pre-tax profits between £550m and £600m.
- CEO Michael Murray remains optimistic about growth, highlighting international expansion and strategic acquisitions despite current challenges.
Frasers Group has adjusted its profit expectations due to a notable decline in sales, indicative of increasing consumer caution. In the first half of the fiscal year, ending October 27, the retail group’s pre-tax profit fell approximately 33%, dropping to £207.2 million from £310.2 million the previous year. The company has been affected by various factors, including a decrease in foreign exchange rates and a significant drop in the Hugo Boss share price.
Overall group sales weakened, declining to £2.54 billion. This included a notable 20% drop in financial services revenue, which fell to £45.7 million, alongside an 8.4% dip in the retail division, bringing its revenue down to £2.45 billion. A weaker performance was observed across the entire retail sector, with the premium lifestyle section falling 14% to £472.7 million and UK sports retail decreasing by 7.6% to £1.37 billion.
Frasers Group did, however, experience a boost in its property portfolio, with sales surging 21% to £38.0 million. This reflects the company’s strategic diversification efforts, allowing it to somewhat balance losses in other areas.
Looking ahead, Frasers Group expects ongoing financial challenges, forecasting adjusted pre-tax profits ranging from £550 million to £600 million, a reduction from an earlier range of £575 million to £625 million. The company also projected additional costs, estimated to be at least £50 million, attributed to recent fiscal policies introduced in the budget.
Despite these obstacles, CEO Michael Murray has expressed a positive outlook for future growth. He noted the company’s progress against goals outlined in its Elevation Strategy. He mentioned that “Sports Direct UK delivered further sales growth” and highlighted encouraging trends in the property and financial services divisions. He emphasized efforts to keep the business resilient through recent acquisitions and automation improvements, which are expected to exceed stock reduction targets.
Murray also spoke on international endeavors, emphasizing the establishment of new partnerships in Australia and Africa. These initiatives are seen as fundamental steps toward Frasers Group’s objective of becoming a leading global sports retailer. While acknowledging recent weakened consumer confidence, particularly around the Budget period, he firmly believes in delivering another year of profitable growth.
Frasers Group navigates a challenging retail environment with strategic initiatives and an optimistic outlook for global expansion.
