U.K. retailer Frasers Group, bolstered by acquisitions and a strong performance from its core Sports Direct business, generated a 61 percent increase in annual operating profit to £531.8 million (€613.2m) for the 53 weeks ended April 30. Adjusted profit before tax rose by 41 percent to £478.1 million. FY gross margin slipped by 90 basis points to 42.6 percent from 43.5 percent as the impact of store closures and brand consolidations offset improvements in Sports Direct’s product assortment. The board has decided not to pay a final FY23 dividend, opting instead to preserve financial flexibility and enable more investments into its business. The company ended FY23 with a 5 percent year-over-year store growth to 1,630 doors.
Annual group revenues improved by nearly 16 percent to £5,565.2 million (€6.52b) from £4,805.3 million, with all four segments up by double-digits, led by a 16.7 percent increase to £3,080.6 million (€3.55b) by UK Sports Retail that was fueled by the acquisition of a financial services unit last year. Excluding that purchase and the 53rd week, annual segment sales inched up by 0.8 percent. Elsewhere, Premium Lifestyle segment revenues rose by nearly 15 percent to £1,212.9 million (€1.4b) as online expansion and new Flannels store openings offset House of Fraser store closures. Excluding acquisitions and the 53rd week, segment revenues increased by 5.7 percent.
Meanwhile, the mid-May 2022 acquisition of Sportmaster in Denmark and higher sales from its Malaysian business helped push International Retail sales up by 15 percent to £1,083.4 million (€1.25b). But excluding the acquisition, disposal of the U.S. retail business (Bob’s Stores and EMS) and the 53rd week, segment revenue declined by 2.4 percent.
Frasers, which is forecasting 4.6 to 15 percent growth in adjusted profit before tax in FY24 to a range of £500 to £550 million, says its “elevation strategy” is working. Key elements of the plan going forward include opening several more Flannels and Sports Direct flagship stores, continuing to strengthen its relationship with key strategic partners that include Nike, utilizing Sportmaster to support its European expansion plans, and leaning on Missguided to help it continue building its e-commerce expertise and understanding of Gen-Z consumers.
“Our operational efficiency continues to go from strength to strength,” said CEO Michael Murray in a statement. “We have increased the storage capacity of our forward pickface by more than 350 percent and therefore increased our SKU count. As a result, we now process more than 215 million units annually, and we need 50 percent less warehouse locations. Not only have we effectively minimized our physical footprint, but we can now ensure all new acquisitions work to the same standards that our core business has built.”
