- Annual profits power 13.1% higher
- Stand-out showing from Sports Direct
- ‘Strong’ profit increase expected in FY25
Frasers’ (FRAS) topped the FTSE 100 leader board on Thursday 18 July, surging 9.5% higher to 899p after the retail giant delivered annual profits at the top end of guidance, driven by Sports Direct, and expressed confidence in delivering ‘another strong increase’ in profits this year.
Controlled by mercurial retail magnate Mike Ashley, Frasers has now passed the half-a-billion-pound mark for annual pre-tax profit, double what it made a decade ago, and is making big strides strategically, leaving its days as a straightforward pile ‘em high, sell ‘em cheap retailer in the distance.
PROFITS PASS HALF-A-BILLION MARK
For the year ended 28 April 2024, the Sports Direct, Flannels and House of Fraser-owner delivered a 13.1% rise in adjusted pre-tax profit to £544.8 million.
That was at the top end of the company’s £500 million to £550 million guidance range and breezed past the £516 million consensus estimate.
The impressive double-digit profit increase was delivered despite a 1.3% decrease in retail revenue, as a strong performance from Sports Direct, which speaks for more than half of group revenue and delivered another year of sales and gross profit growth, was broadly offset by expected declines in Game UK and Studio Retail, as well as House of Fraser store closures and a weaker luxury market.
Frasers’ successful ‘Elevation’ strategy continues to power the deal-hungry retail conglomerate’s strong financial performance, with strategic brand relationships giving it better access to product across the group.
MURRAY REMAINS CONFIDENT
For the new financial year, Frasers expects to achieve another strong increase in pre-tax profit in the £575 million to £625 million range, supported by the summer of sport and synergies from its automation programme and the integration of acquisitions.
CEO Michael Murray commented: ‘This has been a break-out year for building Frasers’ future growth. As well as delivering a strong trading performance, particularly from Sports Direct, we made significant progress with our Elevation Strategy. We expanded our retail ecosystem, establishing valuable partnerships with new brands. Our brand relationships have never been stronger, giving us invaluable support as we continue the international expansion of our business.’
THE EXPERT’S VIEW
Dan Coatsworth, investment analyst at AJ Bell, stressed that Sports Direct remains at the core of the group, ‘but it’s what being layered on top of this operation that makes Frasers a lot more interesting. As well as going upmarket with the types of products sold and the clientele it attracts, Frasers has also fine-tuned its engine, added a spoiler to go faster, upgraded the tyres and topped up the tank.’
Coatsworth said Frasers is now ‘selling a wider range of brands, has spread its wings geographically, invested money to have more efficient logistics and warehouse operations, and has dipped its toe into the water with a buy now, pay later service for its own shops and third-party retailers.’
He added: ‘While Frasers may always be tempted by opportunities to snap up rivals on the cheap, it feels as if it is no longer reliant on acquisitions to support growth.’
Coatsworth added that Frasers’ robust results suggest Murray, who took over from Mike Ashley as CEO two years ago, has ‘done a fine job despite having had big shoes to fill by taking over from the notable characters in British retail.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.
