Shares in Frasers Group PLC plunged on Thursday after it blamed weaker consumer confidence for a reduction in annual profit guidance.

The retailer which owns Sports Direct and House of Fraser said pretax profit fell by a third to £207.2 million in the 26 weeks to October 27 from £310.2 million a year prior.

Retail revenue alone was 8.4% lower on-year at £2.46 billion from £2.68 billion. UK Sports Retail, which includes Sports Direct, suffered a 7.6% revenue decline on-year to £1.37 billion from £1.49 billion.

Continued sales growth from Sports Direct was more than offset by planned declines in Game UK, Studio Retail, the companies acquired from JD Sports and SportMaster in Denmark as well as a challenging luxury market, the firm said.

Retail gross margin improved to 42.2% from 41.8%.

Group gross margin ticked up to 43.4% from 43.0% due to an improved mix effect, as lower margin businesses reduced as a proportion of total revenue and the higher margin Sports Direct business increased its share.

Chief Executive Michael Murray said it has been ‘another period of progress’ and the group is set to deliver ‘another year of profitable growth.’

But he said ‘weaker consumer confidence leading up to and following the budget’, means full-year adjusted pretax profit is now forecast in the range of £550 million to £600 million.

The company had previously expected an outcome between £575 million and £625 million. Adjusted pretax profit in financial 2024 totalled £544.8 million. In the recent half-year, it declined 1.5% to £299.2 million.

In response, shares in Frasers tumbled 12% to 654.00 pence each in London on Thursday morning. The wider FTSE 100 was up 0.1%.

The retailer was also nursing its wounds after being demoted from the blue-chip index in the latest quarterly reshuffle. FTSE Russell confirmed that all changes from this review will take effect from market open on Monday, December 23.

Frasers expects to incur at least £50 million of incremental costs going into financial 2026 as a result of the recent budget, but is ‘working hard’ to mitigate these to maintain profitable growth ambitions.

Frasers said it delivered £74.7 million cost savings and synergy benefits in the half-year from recent investments in warehouse automation and acquisitions.

Increased warehouse efficiency, driven by automation and rationalisation of the warehouse estate, enabled a £298.8 million, or 17%, reduction in gross inventory year-on-year, ahead of the firm’s target of a 5% to 15% reduction by the end of 2024.

Ten new stores were added, providing an additional 162,000 square feet, including flagships Flannels Leeds and Frasers/Sports Direct Sheffield.

Copyright 2024 Alliance News Ltd. All Rights Reserved.