Frasers are still “working hard to mitigate the £50m-plus” of extra costs from last year’s Budget, but its CFO is expecting more pain to come in the autumn.
Speaking to Retail Week, Frasers Group chief financial officer Chris Wootton pulled no punches when discussing the current government and news that chancellor Rachel Reeves was going to implement a business rates surcharge on large retail premises to offset increases on smaller businesses.
“We’ve spoken to government at multiple levels for literally years and, probably like the rest of retail, we’re just frustrated with how previous governments and the current government just kick [business rates reform] down the road time and time again,” he said.
“We had that ridiculous Budget last autumn, which penalised industries like hospitality and retail that really didn’t need penalising when a lot of those industries are in a real tough spot. And looks like they’re going to do it again. They don’t seem to understand what’s going on.
“We don’t have many expectations of this government, or the next government, or any government, because they’ve all kicked it down the road for so long. They’re all useless.”
When asked whether the reported £1.7bn increase in business rates on larger retail premises would affect Frasers Group store opening plans in future, Wootton said: “Of course it will, absolutely. It’s part of our analysis, along with everything else.
“If the business rates are very high on a premises, then the maths don’t work, and we won’t open that store. It’s maths.”
‘Green shoots’ in luxury
While Frasers reported a revenue decline for its Flannels luxury division, Wootton said the retailer was experiencing some recovery in that segment. Although, he noted, a lot of that was more down to work being done to right-size the division, rather than a jump in consumer confidence.
“There’s been a dip in revenue in that division, which is down to right sizing the businesses we bought from JD Sports a couple of years ago, and closing a few legacy old stores.
“Profitability however has actually gone up a decent amount, on a gross margin basis and a bottom-line profitability basis, because of significant reduction in overheads. But in terms of the wider macroeconomic basis, luxury is still in the trough.
“Which is why we don’t want to suddenly say ‘we’ve turned it around’, because I think we need to see what’s going to happen for at least another six to 12 months.”
1 Reader's comment