Frasers hit by lockdowns but upbeat on future prospects
Frasers Group released its delayed-by-a-week results on Thursday and showed that in the year to April 26, its revenues rose as acquisitions impacted the figures. But its profits fell with the year derailed by Covid-19. It had been on target to meet its EBITDA goals at the end of February before lockdowns changed the picture for so many in UK retail.
However, with its elevation strategy continuing and a new focus on digital as part of that, it said it’s “confident in achieving between a 10% and 30% improvement in underlying EBITDA” in the current financial year. That said, it also warned that more store closures are to come due to surging digital sales.
Group revenue reached £3.957 billion, up 6.9% although excluding acquisitions and on a currency-neutral basis, revenue decreased by 12.6%.
Within this, UK Sports Retail rose 0.7% to £2.2 billion, largely due to the GAME acquisition in the period. But with that excluded, revenue fell 14.6% due to temporary store closures on the back of Covid-19. The like-for-like gross contribution fell 6.6%.
Premium lifestyle (which includes chains such as Flannels and also now takes in House of Fraser) surged 34.9% to £722 million, boosted by new stores and the acquisitions of Jack Wills and sofa.com. There was a rise even excluding those acquisitions, with revenue growing by 18.6% and the like-for-like gross contribution was up 21.8%.
European Retail was up 16.3% to £697.7 million, again impacted by the GAME buy. Without that, Covid-19 closures caused a 15.6% drop and the like-for-like gross contribution was down 12.7%.
But Rest of World Retail was down 19.3% to £174.2 million while wholesale/licensing was down 2% at £160 million. The group gross margin also dipped to 42% from 42.8%.
While reported EBITDA rose 98.7% to £551 million, underlying EBITDA was up only 5% at £302 million and underlying pre-tax profit was down 18.1% at £117.4 million.
The company also said it 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,” it explained.
“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.”
Web expansion aside, the company said the biggest strategic priority for Frasers Group “is, and will continue to be, elevation” overall.
It has been opening new-gen stores and said “we continue to make progress with the reorganisation and elevation of the House of Fraser business. It remains a challenge but we are committed to offering a premium experience to our customers in an elevated environment”.
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