As Frasers Group posts profits at the top of its guidance, Retail Week speaks to chief financial officer Chris Wootton to talk about the results, Frasers Plus, present and future acquisitions and more.
Despite a dip in sales for the full year ending April 2024, Frasers posted an adjusted profit before tax of £544.8m, at the top of its earlier guidance of £500-£550m.
Unsurprisingly, much of this was due to the strong performance of its hero retailer, Sports Direct, which the group said benefited from “strengthened brand partnerships, including onboarding new brands such as The North Face, On and Columbia.”
If there’s one thing to take away from how the sportswear segment has fared in the last couple of years, it is that it can be very volatile.
In the run-up to Frasers posting its results, Adidas upped its guidance for the full year after sales jumped in a “better-than-expected” second quarter. This time last year, the sportswear giant was in a much worse situation after its fallout with rapper Kanye West left it with millions of dollars worth of dead Yeezy stock.
Meanwhile, Adidas’ biggest rival, Nike, saw an 8% decline in sales in its second quarter.
When asked what measures Sports Direct is taking to shockproof its business from the fluctuations in the sportswear market, Wootton says its diverse brand portfolio is where it shows its strength.
“Back to that point of diversification, we are really, really diverse. No brand is more than 15% of our group business. Nike is under 15%, Adidas is under 15%, and anyone else is under 15%. So we’re really well diversified from that perspective.”
Frasers Plus ambitions
Frasers Plus, its credit and loyalty platform, is the newest proposition the group is trying to push to its wider ecosystem. The retailer hinted at this when it announced its first-ever external partnership with THG, integrating Frasers Plus into Ingenuity’s checkouts, making it available to all THG’s beauty and nutrition customers.
The group has set out a few “achievable long-term ambitions” for Frasers Plus, says Wootton.
“Frasers Plus is a central pillar of our growth strategy and a central part of our brand ecosystem. It’s a customer payment solution with loyalty and membership benefits and has been rolled out across all our fascias right now. It gives us a single view of the customer; it lets the customer shop across fascias. We’ve seen very encouraging early performance and we’ve got some very achievable long-term ambitions.”
These include sales in excess of £1bn, £600m in balances with Frasers Plus accounting for a greater than 15% yield and more than two million active customers on the platform (excluding third-party partnerships).
The retailer is already taking an active approach to acquiring more third-party retail partnerships, reaching out to the stable of brands it has stakes in including Asos, Boohoo, Currys and AO.
Wootton is cautious about revealing the finer details but says more partnerships may be coming sooner than expected.
“Our ambition is to have more of these partnerships like THG and get them over the line in the not-too-distant future.”
Luxury market confidence
As the luxury segment undergoes a period of softness, sales in Frasers’ premium lifestyle division, which includes its Flannels business, fell by 1.2% to £1.2bn.
Flannels, which replaced the House of Frasers department store format, has been key to chief executive Michael Murray’s elevation strategy aiming to reposition Frasers as more than just its Sports Direct business.
In his results statement, Murray said: “We remain committed to the luxury market and, while the environment is likely to remain challenging for the medium term, we are confident in our well-invested and differentiated proposition with Flannels.”
As revealed by Retail Week, Frasers is mulling a potential takeover bid of Yoox Net-a-Porter from Swiss luxury group Richemont.
Wootton says while he cannot comment on acquisitions, Fraser’s recent investments in the luxury segment point to the group’s unwavering confidence that growth in the market will return.
“We’ve built a really strong business; we’ve invested in a great store estate. Like our sports business, we’ve got great strategic brand relationships, and it’s in a real good place for when the market returns. And it will return. It’s very cyclical, the luxury market. Heritage brands have been around for many decades that are ebb and flow. And we’re very confident the market will come back. Probably not in the short to medium term, but long term.”
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