For the 52 weeks ended 28 April 2024 (FY24), Frasers reported a 0.9% decrease in the group's revenue from £5.59bn ($7.26bn) to £5.54bn ($7.20bn).
The group's operating profit went from £535.3m to £520.6m. Meanwhile adjusted profit before tax (APBT) was down from last year's £481.8m to £544.8m.
Frasers reported a £12.5m loss with respect to Matches fashion.
Despite the marginal decrease in numbers, Frasers shared the execution of its Elevation Strategy and strengthened brand partnerships, including onboarding new brands has contributed to a strong trading performance, especially from Sports Direct, which delivered continuing year-on-year revenue and gross profit growth.
Frasers Group CEO Michael Murray called it a "break-out" year for both building Frasers' future and delivering what he described as a "strong" trading performance, particularly from Sports Direct.
Murray said: "We expanded our retail ecosystem, establishing valuable partnerships with new brands. Our brand relationships have never been stronger, giving us invaluable support as we continue the international expansion of our business. We invested in group-wide operational efficiencies in warehouse automation and digital infrastructure, which we expect to yield a tangible impact as early as FY25. And we generated new growth opportunities with the rollout of Frasers Plus, including recently signing our first third party partner in THG."
The conglomerate is continuing to leverage third-party brand relationships and Sports Direct's positioning to unlock further international expansion opportunities such as growing its presence in the Nordics, a joint venture in Southeast Asia, and currently acquiring a leading sports retailer in the Netherlands.
Promising future despite dwindling numbers
Research analyst from Shore Capital, Clive Black views Frasers as a growing business, expecting its ongoing growth to persist and for the conglomerate to be "more not less relevant" in the future.
Black said: "The FY24 performance is, unsurprisingly, again driven by Sports Direct (c52% off Group revenue), where positively evolving brand partnerships are cited as beneficial, especially in international opportunities where expansion is coming through in Europe and South-East Asia. While Sports Direct progressed, Games UK and Studio Retail went backwards, House of Frasers' contracted with planned store closures and, as well documented, see Burberry recently, the UK luxury market has been weak."
Commenting on Frasers' plans moving forward, he said the Group appears to be focusing upon harvesting the benefits of aforementioned partnerships, infrastructure investment, and recent acquisitions in retail and financial services.
However, he pointed out a lot was going on at Frasers, saying that the allocation of capital can appear a bit "discoordinated and opportunistic at times."
"Debenhams and Matches Fashion have not been signature moments either. That said, there is a strong core here in Sports Direct and we get the talk of an ecosystem with moving parts that in time add up to a larger and more relevant business around channels, geographies, assets and functions. On the back of bottom-line progress, the outlook appears stable with some potential external tailwinds that ay boost adjusted earnings."
GlobalData associate apparel analyst Alice Price was keen to point out consumer demand for sportswear and luxury goods has suffered in the recent delicate economic climate. However, she said: "Its profits remained resilient, with adjusted profit before tax (APBT) rising 13.1% to £544.8m, sitting at the upper end of the group’s initial guidance."
She believes that Frasers is hopeful that a summer of sports, its acquisitions and elevation strategy will pay dividends in FY2024/25, anticipating APBT to be in the region of £575-625m, pleasing investors with its share price up c8% in early morning trade.
She explained: “Frasers’ elevation strategy continued to bear fruit, with the onboarding of new desirable brands such as Alo Yoga, The North Face, and On enabling Sports Direct to capitalise on the outperformance of premium sportswear."
Price also suggests a focus on strengthening its existing brand partnerships boosted its relevance, allowing its ranges to feature more exciting products.
However, with Sports Direct accounting for the majority of sales within the UK sports retail fascia, growth must still have been minimal, which she said reflects the slowdown being witnessed in the wider sportswear market, though its value proposition will have awarded it some resilience.
In terms of the luxury market, Price stated: “Frasers Group’s premium lifestyle division declined 1.2% with the segment’s subdued performance reflective of the softness in the luxury market, as aspirational shoppers reigned in discretionary spend.
She predicts FY2024/25 will likely be another difficult year for this fascia as consumers take time to regain confidence in more expensive purchases, but luxury remains a focus for Frasers as it continues to invest in strengthening its portfolio.
She added: "In June 2024, Frasers acquired luxury e-tailer Coggles from THG, while in July, it upped its stake in Hugo Boss, now owning 21.8% of Hugo Boss’ total share capital. It has also been reported that the group is mulling a takeover of struggling luxury online marketplace YOOX Net-a-Porter, though Frasers should be cautious about this given the failure of its acquisition of Matches, which Frasers placed into administration after just three months, causing a £12.5m loss.
“The conglomerate’s international retail division delivered the most resilient performance in FY2023/24, with revenues increasing 3.3%, aided by the growth of Sports Direct overseas, having opened its first stores in Indonesia and launched 10 new localised websites in Europe, as well as the acquisition of Australian fashion marketplace MySale."
Price concluded: "International should continue to be a driver for the group in FY2024/25 as it finalises its purchase of Twinsport in the Netherlands and aims to develop further in South East Asia.”
