- Frasers’ annual sales surge 31% higher
- Retail conglomerate upgrades earnings guidance
- Says brand partnerships are ‘deeper and stronger’ than ever
Shares in Frasers (FRAS) were the FTSE 250’s top risers, sprinting 21% higher to 906p, after the Sports Direct-to-House of Fraser-owner shrugged off retail sector headwinds to deliver a record-breaking year.
Shrugging off the inflationary pressures and supply chain snarl-ups impacting the wider sector, the Mike Ashley-controlled sportswear and luxury brands purveyor swung from losses of £39.9 million to forecast-beating adjusted pre-tax profits of £344.8 million in the year to 24 April 2022.
Frasers also upgraded its pre-tax profit guidance for full year 2023 to between £450 million and £500 million, with management confident that its ‘Elevation’ strategy and robust trading will deliver another strong performance.
STRONG COVID RECOVERY
Group sales grew 30.9% to approaching £4.75 billion last year as Frasers enjoyed a spectacular recovery from the ravages of Covid-19.
Revenue in the UK Sports Retail division, which includes Evans Cycles and GAME, increased by 31.2%, largely due to the strong reopening of stores following the last lockdown in March 2021 and as Frasers lapped easy Covid-impacted comparatives.
Sales in the Premium Lifestyle division including House of Fraser, Jack Wills and Sofa.com increased by 43.6% with a boost from new FLANNELS stores and continued online growth.
Michael Murray, CEO, insisted: ‘It’s clear that our elevation strategy is working and we are building incredible momentum with new store openings, digital capabilities and deeper brand partnerships across all of our divisions. We’ve got the right strategy, team and determination to keep driving our business from strength to strength.’
Murray added: ‘Our brand partnerships are deeper and stronger than they have ever been in the group’s history. These relationships will allow us to continue improving our product offering and customer experience by creating the best platforms to enable our brands to succeed.’
Frasers remains as deal-hungry as ever, having recently purchased women’s fashion brand Missguided and online value retailer Studio out of administration, bought Danish sport retailer SportMaster to strengthen its European expansion strategy, increased its strategic stake in German fashion house Hugo Boss (BOSS:ETR) and also taken a stake in struggling fashion marketplace MySale (MYSL:AIM).
THE EXPERTS’ VIEW
Russ Mould, investment director at AJ Bell, commented: ‘One would have guessed sportswear and equipment sales might be vulnerable to a deteriorating economic climate, yet Frasers remains relatively upbeat.
‘It’s not a bad start for Michael Murray as the new chief executive, who has some big shoes to fill after taking over from father-in-law Mike Ashley. It helps that a business strategy was already in place when he took over, concentrating on both “pile ‘em high, sell ‘em cheap” Sports Direct stores and posher, upmarket outlets.’
Liberum Capital explained: ‘The success of Fraser’s strategy, supported by brand relationships that are better than ever and robust trading, also benefits from high levels of investment in the business and M&A.
‘Management has set full year 2023 adjusted pre-tax profit guidance circa 37% higher than full year 2022 FY22 providing growth unlike anywhere else in the sector. With such strong momentum, strength of cash generation, and very likely further M&A, it is anomalous that the shares are trading on a single-digit price-to-earnings ratio.’
DISCLAIMER: Financial services company AJ Bell referenced, in this article, owns Shares magazine. The author of this article (James Crux) and the editor (Steven Frazer) own shares in AJ Bell.
