Frasers Group has adjusted its profit forecast downward due to an 8% fall in sales over the last six months.
- The company’s pre-tax profit plunged by 33%, primarily influenced by foreign exchange issues and a decline in Hugo Boss shares.
- Sales in Frasers Group’s retail division saw an 8.4% reduction, alongside a 20% decrease in financial services revenue.
- Despite challenges, Frasers Group’s property division reported a sales increase of 21%, contributing positively to the portfolio.
- Looking forward, the company anticipates further profit in the next fiscal year but cautions of tough trading conditions.
Frasers Group, a key player in the retail industry, has recalibrated its profit expectations for the fiscal year, projecting them to range between £550 million and £600 million due to a notable 8% drop in sales over a 26-week period ending 27 October. The company’s pre-tax profit witnessed a substantial decline of 33%, standing at £207.2 million compared to £310.2 million the previous year. This downturn is attributed to adverse foreign exchange movements and a significant drop in the value of Hugo Boss shares, reflected in a 1.5% adjusted pre-tax profit slip to £299.2 million.
The group’s total sales experienced a reduction to £2.54 billion, majorly due to a 20% decline in financial services revenue, which amounted to £45.7 million, along with an 8.4% decrease in retail sector revenue, totalling £2.45 billion. Within its retail division, the premium lifestyle segment fell by 14% to £472.7 million, compounded by a 7.6% reduction in UK sports retail, which recorded revenue of £1.37 billion.
Amid these declines, the property segment of Frasers Group demonstrated resilience by achieving a 21% increase in sales, reaching £38 million. This division’s growth offers a positive slant to the otherwise challenging financial narrative faced by the group. Despite these struggles, company executives have expressed that they expect adjusted pre-tax profit growth in FY25, although consumer sentiment appears fragile, especially in light of recent fiscal policies.
Michael Murray, CEO of Frasers Group, remarked: “The first half of this year has been another period of progress for the Group, delivering on our objectives as the Elevation Strategy continues to take the business to the next level.” He highlighted continued sales momentum in Sports Direct UK and positive advancements in their property and financial services divisions. However, Murray acknowledged the headwinds, adding that recent acquisitions are being optimised for sustained profitability and international expansion strategies are underway across regions such as Australia and Africa. Methods to enhance automation to surpass stock reduction targets have been noted as strategic moves to bolster the company’s operational framework.
Despite these forward steps, the retailer anticipates incremental costs of at least £50 million in the forthcoming financial year, attributed to the current fiscal policy environment. This financial outlook includes an adjusted profit before tax expectation now ranging from £550 million to £600 million, down from a previous forecast of £575 million to £625 million, a reflection of the weakened consumer confidence in the market.
Frasers Group is navigating a challenging retail landscape with strategic adjustments amidst declining consumer confidence.
