Mannequins model products in Sports Direct store
Frasers’ ‘Elevation’ strategy is driving profitable growth at Sports Direct / Image source: Adobe
  • Profitable growth in core sports retail business
  • ‘Further strong profit progress’ expected
  • Strong cash generation bringing down net debt

Mike Ashley-controlled retail conglomerate Frasers (FRAS) shrugged off the impact of the cost-of-living pressures weighing on consumers to report forecast-beating full year results driven by a standout performance from Sports Direct.

The FTSE 100 retail giant also upgraded profit guidance for the new financial year, sending shares in the House of Fraser-to-Flannels owner 2.3% higher to 797p, although slightly softer than expected performances from its premium lifestyle and international retail businesses kept a lid on gains.


Record results for the year ended 30 April 2023 revealed an impressive 15.8% rise in group sales to £5.6 billion, boosted by acquisitions including fast-fashion sites Missguided and I Saw it First and tailoring brand Gieves and Hawkes, leaving revenues more than 50% above pre-pandemic levels.

Frasers reported a 40.7% surge in adjusted pre-tax profits to £478.1 million, ahead of the £468 million called for by consensus.

This forecast-beating performance showcased the resilience of Sports Direct and was driven by the success of Frasers’ ‘Elevation’ strategy as well as, to quote Shore Capital’s words, the ‘significant positive influence’ of strategic acquisitions.

Sales skipped ahead 16.7% to £3.1 billion in the UK sports retail business, while profits powered higher from £197 million to £447 million due to higher revenue and improved gross margins at Sports Direct, which is benefiting from an improving product mix supported by the strength of the chain’s brand relationships.

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Since the year end, Frasers has made new strategic investments in AO World (AO.), ASOS (ASC), Currys (CURY) and Boohoo (BOO:AIM), supplementing stakes in the likes of Mulberry (MUL:AIM), Hugo Boss (BOSS:ETR) and N Brown (BWNG:AIM), as the deal-hungry retailer looks to ‘explore opportunities to expand commercial relationships, and further develop the ecosystem’.


Drawing confidence from its continuing positive momentum, Frasers predicated ‘further strong profit progress’ this year and guided to full year pre-tax profit in the £500 million to £550 million range, with the midpoint representing a 3% upgrade to the £510 million consensus estimate.

The retail conglomerate said the new financial year had started well, ‘especially at Sports Direct, which continues to benefit from the strengthening relationships with key brand partners’, and insisted there will be further benefits as acquisitions are integrated and synergies realised.

Chief executive Michael Murray, Ashley’s son-in-law, said: ‘It has been a particularly significant year for Sports Retail, demonstrating that elevating Sports Direct was the right strategy. Our investment in the store estate, our focus on strengthening key brand partnerships, and the synergies created by strategic acquisitions is now delivering very clear results.’


Shore Capital said Frasers’ current share price discount to peers is ‘unjustified, considering the company’s strengthening market position and its exposure to the luxury sector, as well as its significant diversification within the consumer space.’

Liberum Capital pointed out that Sports Direct is ‘now formally one of Nike’s (NKE:NYSE) top-three global strategic partners’ and highlighted the fact that Frasers’ net debt is falling due to strong cash generation ‘despite significant investments made in strategic assets’.

The broker added that Frasers’ ‘conservative accounting is overlooked by the market, and makes our £10 target price look even more attractive.’


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Issue Date: 27 Jul 2023