Frasers blames slowing profit growth on budget ‘dark clouds'

Times

17-07-2025

Mike Ashley's Frasers Group has warned that profits could decline in the year ahead, citing the 'dark clouds' cast by the chancellor's October budget and the threat of further tax increases.
The owner of Sports Direct, Flannels and Frasers expects adjusted pre-tax profit this financial year to be in the range of £550 million to £600 million. The FTSE 250 retailer reported a 2.8 per cent rise in profit to £560.2 million for the year ended April 27.
Chris Wootton, chief financial officer, said its guidance was cautious because of the 'drumbeats of doom and black clouds gathering for the next budget', as well as continued subdued consumer sentiment.
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Frasers, one of the retail industry's largest employers with more than 32,000 staff, had blamed the UK government's tax rises for its profit forecast downgrade in December, saying that it felt 'kicked in the face' as the measures dampened consumer confidence. The group expects to incur at least £50 million of costs stemming from the 2024 budget.
Wootton said he would urge the government to 'think about what you're doing' when asked about potential tax rises at the next budget. 'The national insurance increases are penalising industries like hospitality and retail, which have been under the cosh for many years,' he said. 'It showed a degree of economic illiteracy.'
Frasers, majority-owned by the British businessman Ashley, is working to mitigate those cost pressures by using artificial intelligence and sustaining strong margins.
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It said the payment of dividends remained under review as it tried to preserve 'financial flexibility'.
Ashley founded the retail empire with a sports shop in Berkshire in 1982. The group changed its name from Sports Direct after the purchase of the Frasers department stores.
The group has struggled as shoppers cut back on clothing spend amid inflationary pressures and economic uncertainty.
Group revenue at Frasers fell 7.4 per cent to £4.9 billion, largely driven by a 14.8 per cent drop in sales in the group's 'premium lifestyle' division, which includes the luxury Flannels chain and the House of Fraser and Frasers department stores.
Sales at the core sports retail division, which includes Sports Direct and Evans Cycles, dropped by 7.2 per cent to £2.7 billion during the period.
Wootton said sales at the start of the current financial year had been encouraging as consumer confidence improved from the lows during and after the UK budget last year.
'We're not going to jump up and down about it because we want to see if there's real structural change, but we have started seeing some green shoots in our premium lifestyle division,' he added. 'It's nice to see some green on the screen rather than red.'
RBC Capital noted that Frasers contained 'a lot of moving parts but we think it should be relatively resilient, with good cash generation and asset value from strategic stake investments. Frasers is now more diversified meaning that it should offer protection from pressures on any one area of consumer spending.'
As part of its strategy, Frasers has been acquiring stakes in other retail companies including Asos, Boohoo, AO World and Mulberry.
Mulberry handed a board seat to Frasers this month as Andrea Baldo, its new chief executive, attempted to ease tensions with the major shareholder after a difficult period of falling sales and mounting losses.
Wootton said it had taken Frasers years to get a board seat and it was a step in the right direction, but added that the business 'still needs work'.
Shares in Frasers were flat at 649p in morning trading.