Frasers Group has today reported lower-than-expected annual revenue as the British retailer grappled with a tough luxury market and took a hit from closures of unprofitable stores, sending its shares lower.
The retailer, majority-owned by British businessman Mike Ashley, said recent sales have been encouraging, though, as consumer confidence has improved, with luxury demand in the UK now “less challenging”.
It reported revenue for the year to April 27 fell by 7.4% to £4.93 billion, missing analysts’ average estimate of £5.29 billion in an LSEG poll, pushing its shares down more than 5% in early trade.
While current conditions were improving, Frasers finance chief Chris Wootton told Reuters there were “dark new clouds” over Britain’s next budget that could weigh on consumer sentiment again.
Frasers had blamed tax hikes included in the last budget for its profit forecast downgrade in December.
“We do have to keep an eye on that,” Wootton said.
The owner of brands such as Sports Direct, House of Fraser, Flannels and Jack Wills reported a 2.8% rise in adjusted annual pretax profit to £560m, in line with estimates.
Frasers expects adjusted pretax profit this fiscal year to be in the range of £550-600m.
The group continued its expansion over the past year, entering new markets and increasing stakes in companies such as Hugo Boss and AO World, though it faced setbacks including a rejected bid for Mulberry and unsuccessful attempts to gain board influence at Boohoo.
“Frasers is now more diversified meaning that it should offer protection from pressures on any one area of consumer spending,” RBC Europe analyst Richard Chamberlain said in a note.
“However we think its complexity and recent lack of earnings momentum has been weighing on its valuation,” he added.
