Mike Ashley’s Frasers Group defies cost-of-living crisis

Property sales and foreign exchange movements boost figures, as analysts say profit from retail operations falls 40%

Frasers Group’s string of acquisitions and property sales are helping bolster Mike Ashley’s shopping empire as the cost-of-living crisis weighs on most retailers’ performance.

Frasers, which owns Sports Direct and House of Fraser, is sticking to its goal of adjusted profit before tax at a record £450 million to £500 million (€521-€579 million) for this financial year. The group said it had “strong strategic and trading momentum at a time when many consumers are pulling back on spending”.

The shares fell more than 3 per cent in early trading in London.

Acquisitions are supporting the group’s performance with first-half revenue rising by 12.7 per cent, but only 3.9 per cent when takeover deals are stripped out of the numbers.

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The profit forecast is also being boosted by gains on property sales and foreign exchange movements, rather than profit from retail operations which fell 40 per cent in the first half, said Bloomberg Intelligence analyst Charles Allen.

Founded by entrepreneur Mike Ashley, Frasers is now run by his son-in-law, chief executive Michael Murray, who has introduced a strategy of upgrading stores. He wants to position Frasers to cater to both tighter budgets and bigger spenders with the Flannels brand selling luxury goods.

Mr Murray is also following Mr Ashley’s lead and driving a highly acquisitive strategy. Frasers, one of the only British retailers to see its share value increase this year, has snapped up struggling rivals including Savile Row tailor Gieves & Hawkes and online businesses Missguided and Studio Retail Group.

It has increased its stakes in suitmaker Hugo Boss and fast-fashion hub Asos. The company also recently bought Amara Living with a goal of developing luxury homewear for Flannels.

“It’s in the business’s DNA to be entrepreneurial and to acquire strategic acquisitions,” said Mr Murray in a phone interview.

Frasers expects “many more opportunities for acquisitions in the next six to 12 months and will look at those that have strategic value”, Mr Murray said. The group only considers acquisitions that “benefit our brand portfolio, our platform and operating capabilities or increase our distribution channels”, he added.

Mr Murray said his elevation strategy is starting to pay off and Frasers is getting more access to “must-have products”. “Consumers can choose to trade up to top level products or they can trade down to more affordable products in our own brands,” he said.

Frasers will invest about £600 million in a new distribution centre and offices in Coventry over the next 10 years. As part of this plan, the business bought the CBS Arena in the city, reportedly evicting Coventry City football club from the site.

– Bloomberg