Frasers Group sales up 6.9% as COVID-19 crisis hits profits

Flannels

Frasers Group sales were up 6.9% to £3.96bn in the year to 26 April but reported profit before tax was down almost 20% to £143.5m due largely to the COVID-19 crisis.

Mike Ashley’s retail empire said its acquisitions during the period, which included Jack Wills in the Premium Lifestyle space, had boosted sales which were down 12.6% on an underlying basis.

The UK Sports Retail division, which includes flagship Sports Direct, USC and Evans Cycles, recorded sales up 0.7% to £2.2bn but sales were down 14.6% when its acquisition of Game was stripped out, which it said reflected store closures due to lockdown.

Premium Lifestyle, which includes Flannels, Cruise, van mildert, House of Fraser and Jack Wills along with Sofa.com, was up 34.9% to £722m but when acquisitions were stripped out, it was still up by a strong 18.6%. The company said this was down to the addition of new Flannels stores and increased web sales.

The Group reported EBITDA increased by 98.7% to £551m compared to £277.3m in the prior period, largely due to the change in reporting as a result of implementing IFRS 16. Group underlying EBITDA increased by 5% to £302.1m compared to £287.8m. Excluding acquisitions and on a currency neutral basis, underlying EBITDA was in line with the prior period.

Frasers said it was continuing with its elevation strategy across is store portfolio meaning that its model continues to evolve across all formats. It said that the current situation on the high street meant new opportunities were presenting themselves to grow the estate and add more elevated stores.

In the UK, a number of large format sports stores were opened during the period including Watford, York, Leicester and Glasgow Fort. The elevated store concept has not been limited to the UK, with new stores opening across Europe during FY20.

Highlights include the comprehensive refit of its flagship City 2 store in Brussels, the relocation and elevation of our Sports Direct store in Dolce Vita Tejo Shopping centre, Lisbon and the opening of a flagship Sports Direct and USC in Riga Akropolis, Latvia.

This was the first introduction of the USC offering into the Baltics region. A portfolio of six Toys R Us stores located across Spain were acquired and will be reconfigured in phases to house the new elevated Sports Direct concept, it said.

It also said it expected more opportunities to take stores in shopping centres to arise with more favourable lease terms than previously. Like many retailers Frasers said it was seeking to shift its leasehold estate towards turnover based rents “across all fascias and territories”.

The Frasers Group store portfolio

Frasers Group Sports Direct

Sports Stores – UK including Northern Ireland

The Group is currently operating 367 stores in England, 37 in Scotland, 28 in Wales and 17 in Northern Ireland. There were 16 openings and 16 closures for Sports Direct fascia stores over the period resulting in no change to the overall store numbers from the previous year.

Noteworthy openings include Leicester, Watford, Glasgow Fort, York and Ballymena. All of these stores with the exception of Ballymena are held freehold or long leasehold.

All the new store openings include a USC lifestyle offering as part of the elevated store model across the small / medium / large and extra-large formats.

Store Portfolio – Premium Lifestyle

Flannels

Flannels, Cruise and van Mildert

During FY20 there were eight store openings and two closures resulting in a net increase of six stores. The resulting store numbers consisted of 37 Flannels stores, five Cruise stores and one van Mildert store – a total of 43 stores.

Highlights include the opening of the London flagship store on Oxford Street and the opening of Belfast, the first Flannels to form part of a Frasers store (pictured above).

The Flannels fascia remains a key area of development with plans to expand the model up to approx. 60,000 sq ft incorporating categories including beauty, services and food & beverage; the result of which will create “market leading luxury destination stores”.

House of Fraser

House of Fraser PETA
House of Fraser Oxford Street

The Group started FY20 with 53 House of Fraser stores in the UK and over the period five were closed resulting in a total store estate of 48. A large number of stores remain on flexible terms whilst long term lease negotiations continue. There are anticipated to be further closures over the coming period, the number of which will depend on the outcome of lease negotiation. During FY20 the freehold acquisition of the flagship store at Buchanan Street, Glasgow, completed having exchanged contracts in 2018. In addition, a relocation of the Wolverhampton store was agreed and is due to open in FY21.

As has been the case with the elevated Sports Direct and Flannels stores, a new concept is currently under development for new Frasers stores.

Jack Wills

Jack Wills

Following the acquisition of Jack Wills negotiations across the entire store estate commenced with a total of 96 trading stores in the UK. Over the period 31 stores closed due to performance and being unsuccessful in reaching a new lease agreement. However, two stores were opened bringing the total number of stores at the end of the financial year to 67. 

CEO Mike Ashley said the company would continue with plans to open more, elevated stores in the coming financial year but efforts could be curtailed “due to the circumstances resulting from Covid-19 and adhering to Government guidelines”.

However its elevation strategy would not be confined to physical stores, Ashley said: “The Group now intends to invest in excess of £100 million in its digital elevation strategy. With a particular focus on Flannels and an enhanced customer experience, this investment will be integral in supporting the continued growth of our online channels.

“This commitment will support the Group’s wider ongoing elevation strategy. With digital transformation now at the forefront, the successful reopening of our stores after the Covid-19 lockdown and continuing strong web performance, we are confident in achieving between a 10% and 30% improvement in underlying EBITDA during FY21.”

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