Frasers Group of Mike Ashley, owner of Sports Direct and Jack Wills, plans more acquisitions and store openings after sales rose nearly a third and profits bounced back after the end of major street blockades.
The company’s pre-tax profits, which it also owns House of Fraser, Flannels, Game and Evans Cycles, and which it recently bought online specialists Missguided and Studio Retail, rose through April 24 until to 366 million pounds from just 8.5 million pounds the previous year. , as sales rose almost 31% to £ 4.7 billion.
Frasers ’new CEO Michael Murray said shoppers had defied expectations that sales had changed permanently online during the pandemic. The increase in the group’s profits came despite the £ 227 million reserve from deteriorating property as the value of the stores declined in light of fears about the future of the industry.
Murray said, “We’ve definitely seen a change back on Main Street. People get to experience a diverse mix of brands.”
He said it is likely that buyers will see prices rise in stores as brands reacted to rising costs, while the price of store equipment had risen due to rising costs. of construction.
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However, the group issued a bullish profit target, saying it believed it could earn between £ 450m and £ 500m before tax next year, which would mean at least a 23% increase.
Murray said his strategy had gained “significant momentum” despite cost inflation and supply chain challenges and the group’s exit from its failed investment in Bob’s Stores and Eastern Mountain Sports in the U.S. after the end of ‘year.
“We are confident of a record year and this has caused headwinds,” he said.
The group said it planned to open its first Flannels stores in Ireland (in Dublin, Blanchardstown and Cork) and a flagship sport in Manchester next year.
Murray said the group’s long-term goal was to almost double the size of the Flannels chain to 100 stores in the UK and Ireland. It also wants to open stores in continental European cities.
The group will aim to have fewer, but larger, outlets of Sports Direct, after closing a total of 12 during the year, which could offer a “better experience” for shoppers.
House of Fraser will continue to hire, however. Four more department stores closed during the year bringing the total to 39 in April, compared to 59 when the chain was first acquired by Ashley’s retail group in 2018.
Murray said in the long run that he only wanted 20 to 30 House of Fraser outlets, which would include some new stores and the closure of others. House of Frasers in Cwmbran, Wales, and Epsom in Surrey have closed since the end of the year and Huddersfield will close next month.
“Some of the smaller place stores are too big, rates are too high or sales in stores are not [sufficiently] productive investing in the store or we can’t reach a reasonable commitment on rents, ”Murray said.
The company said in a statement: “We have constantly criticized the archaic corporate tariff regime and the need for reform. Unfortunately, these problems have not yet been resolved and are now joined by rising construction and equipment costs. of stores, which creates an extremely difficult environment to open and operate physical stores.Although others have shied away from engaging in physical retail in these difficult times, we are convinced that consumers will still go to stores to look for great brands and experiences “.
Laura Hoy, a Hargreaves Lansdown equity analyst, said: “It’s hard to trace how many rosy results come from easier comparisons, as the group was overcoming an extraordinary weakness in Covid’s locks. But there were some promising signs, such as now efficiency improvements and the expansion of higher margin parts of the business.
“Only time will tell if Murray ‘s optimism is based on reality; we wonder if [linked online and store] The experiences are enough to attract shoppers back to the stores. And Frasers’ stable brands are at risk of being compressed by the cost of living crisis. “