Frasers Group issues profit warning over Tier 4 shutdown

Mike Ashley’s Frasers retail empire has issued a profit warning, saying publicised guidance of a 20% to 30% boost in profits this year is unlikely to be achieved.

The group, which includes Sports Direct, House of Fraser, Flannels and USC, had only issued the guidance earlier this month.

But the new Tier 4 rules introduced unexpectedly over the weekend have hit the business, with many stores forced to close to customers – although stores will still be offering click & collect.

In an update to the stock market, the company said: “From Sunday 20 December 2020, the Government closed non-essential retail in London, the South East and East of England with no warning.

“This has led to virtually all of our stores closing in these areas.

“Given this is a peak trading period, and combined with the high likelihood of further rolling lockdowns nationwide over the following months at least, such is the uncertainty of when stores can and cannot open that the board of Frasers Group plc can no longer commit to Frasers Group achieving its publicised guidance of a 20% to 30% improvement in underlying EBITDA (pre-tax profits before one-off costs) during FY21 and, accordingly, is withdrawing its guidance.”

Earlier this month, the company revealed that pre-tax profits rose by 17.6% to £106.1m, in the half-year to the end of October.

The group said it had seen a “successful reopening of our stores in England” following the national lockdown, adding “we can confidently raise the bottom end of our full-year guidance”.

The retailer said it had benefited from the business rates holiday, although revenues fell 7.6% to £1.89bn due to the six weeks of store closures in the first lockdown. Excluding acquisitions, revenues fell 12.6%.

On Thursday last week, Frasers confirmed it would not buy a stake in Somerset-based handbag maker and luxury fashion brand Mulberry, after building up a 36.8% stake in the business.

However the group has stated that it is interested in the potential purchase of some of Arcadia's brands after Sir Philip Green's group collapsed into administration earlier this month. It has also been locked in talks to save parts of the Debenhams department store chain, which is currently undertaking a liquidation process, but so far no deal has been agreed.

The first Arcadia brand to be sold was plus-size specialist Evans, which went to Australia's City Chic. The £23m deal does not include its bricks and mortar stores.