FRASERS Group, the company behind department store Frasers and sportswear retailer Sports Direct, attributed a strong first half to robust sales in its UK sports and international retail divisions as it chalked up profits of £298.1 million, an increase of 8%, for the 26 weeks ended October 29, 2023.

Adjusted profit before tax came in at £303.8m for the period, an increase of 12.6% year on year. Group revenues also increased by 4.4% to £2.76 billion with retail revenue up 4% to £2.68bn, largely due to acquisitions in the previous financial year, while growth in the UK sports retail business unit, which includes Sports Direct and accounted for more than half of its full-year revenues at £1.5bn, was up by 0.8% year on year.

However, Frasers cautioned that a “softer luxury market in the short to medium term” due to the cost of living crisis could impact its premium lifestyle division which includes men’s store Flannels although it still increased sales by 3.1% year on year to £550.1m, bolstered by acquisitions including former Oasis frontman Liam Gallagher’s Pretty Green brand.

Frasers Group sells Missguided brand to Chinese giant Shein

Frasers, controlled by former Newcastle United owner Mike Ashley, handed over the running of the business to his son-in-law Michael Murray last year. Mr Murray said it was heading into the Christmas trading period with “great momentum” with its elevation strategy continuing to “drive strong trading performance across the business with good growth in Sports Direct supported by our brand partners”.

Mr Murray, the group’s chief executive, said: “Our long-term ambitions for our premium lifestyle business remain unchanged although it is likely that progress will remain subdued for the short to medium term in the face of a softer luxury market. However, we continue to invest with confidence in our unique proposition.

“During the period we have opened new elevated stores, and further strengthened brand partnerships to allow us to deliver the best consumer experience.”

Noting that he is “excited about the potential of our strategic investments which we expect to unlock further opportunities for the group”, Mr Murray said: “We have a clear ambition to be the leading sports retailer in EMEA (Europe, the Middle East and Africa) and we are making progress on broadening our footprint through a focused international M&A (mergers and acquisitions) strategy.

“As we look to 2024, we are confident that our diversified proposition will continue to provide consumers with choice across a range of brands and price points.”

The group, which also owns retailers including Jack Wills and Evans Cycles, is planning to relocate to a global headquarters campus in Rugby, Warwickshire to facilitate future growth.

It has also acquired shopping destinations including the Overgate Shopping Centre in Dundee, which are well positioned to unlock future growth opportunities in high-performing retail locations, it said.

Frasers has made further strategic investments in AO World, Asos, Currys and Boohoo as the group looks to explore opportunities to expand commercial relationships. It also made a £20m profit on the sale of the Missguided brand, which it bought in 2022, to the Chinese fast fashion group Shein.

Frasers goes with AO in continuing drive for retail dominance

While the headlines for Frasers Group look good, it’s important to dive deeper into the figures, according to Russ Mould, investment director at AJ Bell. “Frasers’ quest to dominate the ‘athleisure’ and sporting equipment market appears to be going to plan when you look at the headline figures,” he said.

“Its half-year results show decent progress thanks to solid gains from Sports Direct. The company attributes some of its success to bringing in new brands including The North Face and On Running.

“But look under the bonnet and not everything is ticking over smoothly. One-fifth of its sales come from its premium lifestyle segment. If you exclude acquisitions and disposals, revenue for that division fell by 11.2% in the half-year period.

“Many companies in the luxury market have talked about softer demand in recent months and Frasers has now joined the club. Wealthier individuals are being more cautious with their spending and this is sending shockwaves across the luxury sector which has, up until recently, merrily chugged along.”

Mr Mould noted: “Normally in a softer market Frasers would reach for its fluorescent banners and start slashing prices to shift goods. But that strategy won’t work for the premium market. Discounting is the last thing anyone wants to do from a reputational perspective.”