Acquisitions have played a crucial role in driving revenue growth for Frasers Group, the parent company of Flannels, as demonstrated by the positive results reported for the six months leading up to October. Despite difficult market conditions, the company’s overall revenue increased by 12.7% to £2.638 billion. This growth was primarily fueled by acquisitions, with revenue increasing by 3.9% on a currency-neutral basis, excluding acquisitions and disposals.

The company also saw a significant rise in profit before tax (PBT), which rose by 53% to £284.6 million. Adjusted PBT increased by 38.8% to £267.1 million, and net profit saw a notable increase of 52.8% to £219.6 million.

All divisions within the Frasers Group showed progress during this period. UK Sports Retail, the company’s main driving force, experienced a revenue increase of 11.6% to £1.526 billion. The fashion-focused Premium Lifestyle division also performed well, with revenue rising by 24.7% to £533.5 million. International Retail revenue increased by 5.8% to £492.2 million, and Wholesale/Licensing revenue was up 8.6% at £86.2 million.

However, the group’s gross margin decreased from 44.7% to 42% compared to the previous year. This decline can be attributed to various factors, including the acquisition of Studio Retail, the disposal of US retail businesses, House of Fraser store closures, a strong prior-year comparative of full-price trading, cost of goods inflation, and a maintained inventory provision percentage in the current period.

Despite the challenging macroeconomic environment and unpredictable market conditions for the coming year, Frasers Group remains confident in its guidance for adjusted PBT. The company expects it to be between £450 million and £500 million for this financial year.

Taking a closer look at the figures, the 11.6% increase in UK Sports Retail revenue was mainly driven by the acquisition of Studio Retail Limited (SRL) in February. Excluding acquisitions, revenue fell by 3.1%, which can be attributed to Game UK and challenging year-on-year comparisons. The significant increase in Premium Lifestyle revenue was primarily due to the opening of new Flannels stores and continued growth in online sales. Even excluding acquisitions, revenue in this segment increased by 22.2%. The rise in International Retail revenue was boosted by the acquisition of Denmark’s Sportmaster and an increase in the Malaysian business. However, it was offset by the reduction in revenue following the disposal of US retail businesses. Excluding acquisitions, disposals, and currency shifts, international revenue increased by a healthy 9.2%.

Frasers Group’s success can be attributed to its strategic acquisitions of various brands, including Missguided, I Saw It First, Gieves & Hawkes, and Amara Living. These acquisitions have allowed the company to expand its capabilities and customer base, unlocking new opportunities in different market segments. For example, acquiring Sportsmaster in Denmark strengthens the company’s international presence in sporting goods retail. The acquisition of Studio Retail supports the strategy of offering credit to customers and has led to the launch of Frasers ‘Plus’ product, which will roll out across the majority of the group in 2023. The acquisitions in the Premium Lifestyle segment expand the company’s digital offerings, improve sourcing capabilities, and enhance social media marketing expertise. Additionally, acquiring Gieves & Hawkes aligns with the company’s Elevated offering, and the acquisition of Amara Living supports the development of Flannels as a luxury homeware destination.

In addition to acquisitions, Frasers Group has been investing in physical stores. The luxury Flannels chain has been opening new regional flagships, and the company has also entered the beauty sector. The company plans to continue elevating its stores and business in 2023 through both organic growth and disciplined acquisitions. This includes opening a new flagship store for Flannels in Leeds and a Sports Direct flagship store in Manchester. Approximately six new Flannels stores are also expected to open in 2023. Furthermore, Frasers Group is exploring opportunities for European expansion.

Behind the scenes, Frasers Group plans to invest approximately £600 million in a new distribution center and offices in Coventry over the next decade, subject to planning approval.

Overall, Frasers Group has demonstrated its resilience and growth potential, driven by strategic acquisitions and a focus on expanding its presence in different market segments. Despite market challenges, the company remains optimistic about its future performance and aims to continue its upward trajectory in 2023.

Relevant links:
1. Frasers Group Official Website
2. Flannels Official Website