Shares in Mike Ashley’s Frasers (FRAS) continued their strong run on Thursday, sprinting 11.4% higher to 489p as the Sports Direct-to-House of Fraser owner posted a rise in first half profit and raised full year earnings guidance.
Fraser’s confident outlook reflects the successful reopening of its stores in England (2 Dec) after the national lockdown combined with a ‘continuing strong online performance’, though there was no update on its possible rescue of Debenhams in today’s results statement.
UPGRADING GUIDANCE
Resilient retailer Frasers raised the bottom end of its guidance for full year 2021, now forecasting a 20% to 30% improvement in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) this year.
This marked an upgrade on the underlying EBITDA guidance of 10% to 30% growth given in August.
For the 26 weeks to 25 October, underlying pre-tax profit rose 43.7% to £146.3 million as revenue slipped 7.4% to £1.89 billion at the UK’s biggest sporting goods purveyor by sales.
The top line decline was caused by temporary store closures due to Covid-19, offset by the strong reopening of stores after lockdown and growth in Frasers’ online business.
The first half profit uptick also reflected contributions from new Flannels stores, prior year acquisitions and continued operating efficiencies.
BUSINESS RATES WARNING
‘We can weather most of the storms faced this calendar year, however much of the UK high street, which was already suffering before Covid-19, won’t survive unless the Government addresses the out of date business rates regime which is due to return come April 2021,’ said Frasers.
Conspicuous by its absence was any further update on Frasers’ potential rescue of beleaguered department store Debenhams, which Shares reported on here earlier this week. The high street carnage caused by the pandemic is creating opportunities for Ashley to build up his empire of retailers, brands and other businesses.
For the right price, he would love to add Debenhams to a portfolio which already includes House of Fraser, high-end clothing outfit Flannels, GAME, Evans Cycles, Jack Wills, Sofa.com and DW Sports.
Ashley’s charge also boasts an array of strategic investments in companies ranging from Mulberry (MUL:AIM) and Hugo Boss to French Connection (FCCN) and online value retailer Studio (STU), which has just hung up the ‘For Sale’ sign at the urging of Frasers, its biggest shareholder.
