After what the Frasers Group called its most challenging year in its history - due to Brexit, a Belgian tax investigation and Covid-19 - the parent company of Sports Direct and many other retail chains posted a 29 percent rise in earnings for the first half of its fiscal year and even raised its full-year guidance, led by strong online sales and store reopenings after the latest retail lockdowns.

Frasers raised the bottom end of its full-year guidance, forecasting a 20 to 30 percent improvement in underlying Ebitda, up from a previous forecast of a 10 to 30 percent increase.

Formerly known as Sports Direct International, the group controlled by Mike Ashley changed its name to Frasers Group in December 2019, following its acquisition of the House of Frasers, the struggling British chain of department stores. The move was designed to improve its image as part of an “elevation” strategy.

The group’s total revenues for the 26 weeks ended on Oct. 25 were down by 7.4 percent to £1,893.3 million (€2,083m-$2,521m), including declines of 9.8 percent in the U.K. Sports Retail segment and 3.7 percent in European Retail, a segment which mainly consists of sports stores in other parts of Europe. The fall-off was attributed mainly to store closures related to the pandemic.

The company noted that from Nov. 5, all stores in England were closed until Dec. 2. Stores in Scotland and Northern Ireland largely remained open, but in Wales they were closed from Oct. 23 to Nov. 9. Across much of Europe, further restrictions have caused stores to close at various times. Against this backdrop, the online offering remained resilient and helped to mitigate the negative effects of the store closures.

Excluding acquisitions, the UK Sports Retail segment actually saw its total sales fall by 12.6 percent from the year-ago period to £1,071.6 million (€1,178m-$1,427m) in the first half, representing 57 percent of the group’s turnover. The segment includes the group’s Sports Direct and USC stores in the U.K., its fitness division and the U.K. operations of numerous brands acquired in the last 24 months - Evans Cycles, Jack Wills, Game Digital and Sofa.com - including Heatons’ stores in Northern Ireland. In August 2020, the group acquired various non-retail assets of DW Sports for £37.0 million (€40.7m-$49.3m) to complement Frasers’ existing gym and fitness club portfolio.

Growth in the online business partly offset temporary store closures and the gross margin increased by 1.2 percentage points to 44.4 percent, as product margins were maintained and continued to improve. Underlying Ebitda for the UK Sports Retail segment reached £151.4 million (€166.5m-$201.6m), an increase of 6.7 percent for the period, largely due the effective reopening of stores after lockdown, growth in online business, and improved operating efficiencies.

The company opened 42 stores in the segment, closed 38, and acquired 42 over the period, ending with a total of 815 units.

Meanwhile, the European Retail segment, which includes the company’s sports stores in other parts of Europe, led by Belgium, Austria and the Baltic countries, plus Game Spain stores, saw revenues decline by 3.7 percent to £352.0 million (€387.2m-$468.7m), but they fell by 12.3 percent on a currency-neutral basis and excluding acquisitions, due to store closures.

The segment’s gross margin expanded by 0.3 percentage points to 41.7 percent. The underlying Ebitda dropped by 23.7 percent to £25.1 million (€27.6m-$33.4m) due to store closures. The company opened 7 stores in the segment and closed 25, ending with 493 units. In particular, the number of Game stores in Spain was cut from 263 to 241.

In the group’s Premium Lifestyle segment, underlying Ebitda improved from a loss of £7.6 million last year to a profit of £28.4 million (€31.2m-$37.8m), thanks to the opening of new Flannels stores, a full period of trading for prior year acquisitions, continued operating efficiencies, and business rates relief, particularly for House of Fraser. Segment revenues progressed by 4.8 percent to £320.4 million (€352.5m-$426.7m), led by new Flannels stores, increased web sales, and a full period of prior acquisitions. Excluding acquisitions, revenues fell by 0.7 percent.

The division’s gross margin decreased by 4.5 percentage points to 47.0 percent, weighed down by a reduction in concession sales within House of Fraser as a percentage of total sales, which have a higher gross margin. The company opened 2 stores in this segment and closed 8, ending with 173 units.

In August, the group announced that it would be investing in excess of £100 million (€110.0m-$133.2m) in its digital “elevation” strategy. It is now considering a further investment, specifically in digital luxury for the Flannels business, with further details to be announced next summer.

In the Rest of the World, which consists of the revenues of Bob’s Stores and Eastern Mountain Sports, the two U.S. sports retail chains acquired in May 2018, plus the Sports Direct stores in Malaysia, sales declined by 16.3 percent to £77.1 million (€84.8m-$102.7m). The segment’s gross margin progressed by 0.2 percentage points to 39.6 percent, and the underlying Ebitda reached £10.4 million (€11.4m-$13.8m) versus a loss £2.5 million in the year-ago period.

The Frasers Group also reported a 33.3 percent decrease in underlying Ebitda to £11.0 million (€12.1m-$14.6m) for its Wholesale & Licensing division, on 21.5 percent lower revenues of £72.2 million (€79.4m-$96.1m). The segment comprises other brands that it partly licenses, including Donnay, Slazenger, Firetrap, Kangol, Karrimor and Lonsdale. It also offers them in its own stores.

Overall, the group’s gross margin inched up by 0.2 percentage points to 44.0 percent and its underlying Ebitda went up by 24.9 percent to £226.3 million (€248.9m-$301.4m). Profit after tax gained 29.1 percent to £84.4 million (€92.8-$112.4m). In spite of acquisitions, the group’s net debt decreased from £366.0 million in April to £250.1 million (€275.1m-$333.0m) at the end of the period.

As reported separately, Frasers has just returned to the fight with a last-ditch offer for Debenhams in a bid to save the largest and oldest British department store chain from liquidation. This comes after JD Sports Fashion pulled out of acquisition talks.