Elevation strategy drives profit growth for Frasers Group, says GlobalData

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Following today’s release of Frasers Group H1 figures for 2020/21, Alex Hardy, retail analyst at GlobalData, a leading data and analytics company, comments: ‘‘Significant investment in its digital business has helped to mitigate the effects of the COVID-19 pandemic for the Frasers Group, with total revenue declining 7.4% to £1,893m in H1 FY2020/21 despite stores being closed for over a quarter of the period. Recent acquisitions including Jack Wills and Sofa.com were major contributors to this however, with l-f-l revenue witnessing a fall of 11.2%. Nonetheless, these results, combined with English stores reopening in December, has enabled the Group to raise the bottom end of its full year guidance for underlying EBITDA from 10% to 20%, with the upper end remaining at 30%, sending its share price climbing 10% in early morning trading.

“Its £100m digital elevation strategy is a timely and necessary move for key brand Sports Direct, which has lagged behind competitors such as JD Sports online, and digital investment is expected to be further increased, but focused on its premium Flannels business. The Group remains committed to its physical portfolio, however, with the opening of flagship stores and investment in elevating its existing properties. Such emphasis will be key to strengthening relationships with brands such as Nike and Burberry, which are integral to the success of Sports Direct and Flannels, as many brands grow their direct-to-consumer channels.

“The Group is prioritising its premium lifestyle division which outperformed in the period, with a revenue decline of 0.7% excluding acquisitions, driven by the opening of three new Flannels stores. Expanding its store network during these times reflects the demand for the fascia’s premium brands, resulting in growth for the division despite it including a struggling House of Fraser. The Group must not ignore its Sports Retail division though, which contributes 57% of total revenue. The inclusion of Belong Gaming Arenas in its stores will help to provide an experience to customers and ensure stores remain relevant in a world shifting to online.

“Investment in other businesses has been prevalent for the Frasers Group and this continued in the period with increased stakes taken in Hugo Boss and Mulberry, and it acquired DW Sports in August. The Group is currently in negotiations to rescue Debenhams’ UK business, although this has been complicated by the administration of the Arcadia Group, Debenhams’ biggest concession holder which declined Frasers’ offer of a £50m loan facility before going under. The recent opening of a new multi-fascia store in Portsmouth, housing brands such as Sports Direct, Evans Cycles and GAME, signals the Group’s intentions for the future, and the acquisition of Debenhams’ sites would allow it to expand on this.”