Frasers Group, a prominent retail giant, managed to navigate through the challenges posed by the pandemic and minimize the impact on its sales figures. Despite a significant number of its stores being closed during the first half of the year, the company experienced only a modest decline in revenue, coupled with an increase in profits. Investors responded positively to this news, leading to a considerable surge in shares during early trading on Thursday.

Between April 26 and October 25, Frasers Group witnessed a 7.4% drop in revenue, amounting to £1.89 billion. Considering the unprecedented circumstances caused by the pandemic, this decline is noteworthy. It is important to note that the decline was mitigated by the company’s acquisitions over the past year. However, when excluding these acquisitions and considering currency-neutral figures, the revenue decline stood at 11.2%.

Among the group’s divisions, the premium lifestyle segment stood out with a 4.8% increase in revenue, reaching £320 million. This growth can be attributed to the opening of new luxury Flannels stores, increased online sales, and the successful integration of Jack Wills and Sofa.com, which were acquired in the previous year. Excluding the impact of these acquisitions, the division’s revenue only saw a slight dip of 0.7%.

In the UK sports retail sector, revenue declined by nearly 10% to £1.07 billion due to temporary store closures. However, this decline was partially offset by online sales. European retail revenue also experienced a decline of 3.7% to £352 million, while the rest of the world saw a more significant decrease of 16.3% to £77.1 million. The wholesale & licensing division was the hardest hit, with a 21.5% fall to £72 million.

Interestingly, despite the challenging conditions, Frasers Group’s gross margin increased slightly to 44%, and underlying EBITDA rose by 25% to £226.3 million. The reported pre-tax profit also saw significant growth, rising by nearly 18% to £106.1 million.

Frasers Group expressed confidence regarding the reopening of its stores in England on December 2 and raised the lower end of its full-year guidance for FY21. The company anticipates a 20% to 30% improvement in underlying EBITDA during the fiscal year, thanks to successful reopening efforts and strong online performance.

Chairman David Daly highlighted the resilience of the company’s online offering and stressed the importance of strengthening relationships with key suppliers. Frasers Group has focused on enhancing partnerships with renowned brands like Nike, Burberry, and Hugo Boss to improve the consumer experience within its stores. The company has also made strategic investments in suppliers such as Hugo Boss and Mulberry, while investing over £100 million in its digital luxury elevation for the Flannels business.

Analyzing the performance of its divisions, Frasers Group’s Premium Lifestyle segment, which includes brands like Flannels, Cruise, van mildert, House of Fraser, Jack Wills, and sofa.com, experienced sales growth. However, the gross margin within this segment decreased to 47%, primarily due to a reduction in higher-margin concession sales at House of Fraser. Nonetheless, the segment’s underlying EBITDA improved significantly from a loss of £7.6 million to a profit of £28.4 million, driven by various factors such as new store openings, prior year acquisitions, operating efficiencies, and business rates relief.

UK sports retail, the main driver of the group’s trading performance, accounted for 57% of group revenue. Despite a revenue decline of 10%, or 12.6% excluding acquisitions, the segment’s gross margin increased to 44.4% as product margins improved. Underlying EBITDA for UK sports retail reached £151.4 million, a 6.7% increase, thanks to successful store reopenings, online growth, and improved operating efficiencies.

Frasers Group’s ability to adapt to challenging circumstances is evident in its financial performance in the first half of the year. The company’s strategic investments, focus on digital growth, and efforts to strengthen supplier relationships have played vital roles in its success. With the encouraging reopening of its stores and strong online performance, Frasers Group is well-positioned for further improvement and growth in the coming months.

Useful Links:
1. Frasers Group Investor Relations: https://www.frasers.group/
2. Company Acquisitions: https://www.frasers.group/investors/company-acquisitions