Frasers Group reported a 15.8% increase in revenue, reaching £5.6bn ($7.2bn) during the 12-month period.
The growth was attributed to elevating the Sports Direct brand as well as acquiring online fashion retailer Missguided in June, luxury menswear brand Gieves & Hawkes in November and the benefit of having an irregular 53 as opposed to 52-week reporting period.
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Frasers Group CEO Michael Murray says the company’s elevation strategy is continuing to drive results across every segment. He points out it has been a particularly significant year for sports retail, demonstrating that elevating Sports Direct was the right strategy and notes the company has remained resilient during the cost-of-living crisis.
Operating income went up 61% to £531.8m compared to last year’s result of £330.4m.
The group, which also owns House of Fraser and Jack Wills, reported a pre-tax profit of £660.7m in the year to the end of April, nearly double the £336m made last year.
Key results from Fraser FY performance:
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By GlobalData- Gross profit increased 13.5% to £2.4bn, whilst gross profit margin dropped 90bps to 42.6%.
- The UK sports retail division of Frasers Group, which includes Sports Direct contributed over 50% of the group’s total annual revenues, amounting to £3bn, representing a significant 16.7% year-on-year increase.
- The premium lifestyle segment, including Flannels, saw a 14.8% year-on-year sales growth, reaching £1.2bn.
- International Retail revenue increased 15.2% to £1bn.
- On an adjusted profit before tax (PBT) basis, earnings grew by 40.7% to £478.1m.
The company explains Sports Direct’s positive performance was helped by brand partnerships including sportswear giant NIKE.
It also notes the closure of ten House of Fraser stores impacted revenues within the premium lifestyle division. However, the negative impact of store closures was balanced out by the opening of new outlets for the fashion chain Flannels, two new stores for House of Fraser and a notable increase in online sales.
Looking ahead, the group expects “strong” profit progress during FY24. It also anticipates “good” progress on acquisition integration synergies and cost mitigation exercises.
Murray states: “In my first full year as chief executive, we have delivered a strong performance across the group.
“We were bold in setting our full-year guidance twelve months ago before the full impact of the cost-of-living crisis was clear, but our business has remained resilient, and we have met these expectations.
“We enter the new financial year in a strong position and are determined to unlock further growth, underpinned by our laser focus and acceleration of our elevation strategy.”
Frasers Group relies on acquisitions to drive growth
GlobalData retail analyst Tash Van Boxel explains Frasers Group saw growth across all of its divisions in FY2022/23, building on a robust performance in the prior year, with operating profit growing to £531.8m and group revenue up 15.8% to £5.6bn.
However, she points out: “This was largely due to acquisitions and the addition of a 53rd week, and without these factors, group revenue only rose 1.3% on a currency neutral basis. Nonetheless, Frasers Group’s investment into expansion, both in its acquisition portfolio and store estate, is impressive as the group aims to diversify and expand its relations with other retailers.”
She believes the investment in struggling retailers AO, ASOS and the Boohoo Group shows Mike Ashley is optimistic that the performances of these online pureplays will improve soon, though she highlights the investment in Currys appears to be the safest of its ventures, given its position as market leader in the electricals market.
Plus, she says: “Frasers Group’s UK sports retail fascia was up 16.7% to £3bn in FY2022/23, with growth predominantly driven by the acquisition of Frasers Group Financial Services (formerly Studio Retail Limited), which was obtained in February 2022. While Frasers Group states that Sports Direct has been a driving force in the growth of this fascia, as the retailer strengthened its relationships with the likes of Nike as part of its Elevation Strategy, UK sports retail revenue excluding acquisitions only grew 0.8%. Given that Sports Direct makes up the majority of sports retail sales, the level of growth it has actually achieved is questionable.”
Meanwhile, she explains its premium lifestyle division grew 14.8% to £1.2bn, as Flannels expanded its store estate and improved its online offer.
“Of all its fascias, it performed the best when excluding acquisitions and the 53rd week, up 5.7%, suggesting that demand for its premium retailers has waned the least, likely due to more affluent consumers being able to maintain their shopping habits during the cost-of-living crisis. Indeed, though House of Fraser was forced to close stores, this was offset by Flannels store expansion, with a new flagship opening in Liverpool this year. Frasers Group must continue to promote its premium retailers as this division remains an area of growth for the company.”
She adds: “The roll out of Frasers Plus, a feature which combines a loyalty scheme with finance options, across all of its brands will be pivotal for the group going forward as this will enable consumers to spend on items they want now, with smaller upfront costs, helping drive volumes as well as sales for Frasers Group.”
Given the success of Very.co.uk’s finance options, launching its own version, independent of Buy Now Pay Later options such as Klarna, is vital for Frasers Group to continue to build on its growth, states Van Boxel.
She concludes: “While inflation is forecast to continue to fall, consumer confidence will be slow to improve, highlighting why offering finance options is, and will continue to be, so vital to maintain consumer demand, as they afford consumers greater financial freedom.”
