Frasers Group blames Budget for lower profit forecast

Frasers shares fell on Thursday as the owner of Sports Direct cut its profit guidance and the retail giant braced for the FTSE 100’s slide.

The group told shareholders that consumer confidence and trading conditions had been “tougher” before and after the UK government’s autumn budget.

Mike Ashley’s retail empire now expects adjusted pre-tax profits to total £550m to £600m this financial year, up from a previous forecast of £575m to £625m.

Chancellor Rachel Reeves announced increases to the national minimum wage and employers’ national insurance contributions during her first budget, sparking the ire of many retailers.

Due to these changes, Frasers expects to incur a further £50 million in incremental costs from fiscal 2026.

Frasers slumped 10.2 per cent to 665.5p at midday, making them the biggest loser on the FTSE 100 index by far.

The group will drop out of the top-tier index in this month’s reshuffle.

The Derbyshire-based group revealed its operating profits fell 10.5 per cent to £266.8m in the six months to 27 October.

Total turnover fell 8.3 per cent to around £2.5bn, with around half of the fall due to reduced revenue at its UK sports retail division, where Frasers has been reducing revenues. low margin sales at Game UK and Studio Retail.

At its premium lifestyle business, home to Jack Wills and Sofa.com, the company’s sales fell 14.1 per cent to £472.7 million amid a restructuring at House of Fraser stores and the brands purchased from JD Sports two years ago.

Outside Britain, revenue was hit by weaker demand at Sportsmaster and Game Spain, the latter affected by the conclusion of the current games console cycle.

Despite the weaker sales, Frasers chief executive Michael Murray said the period “has been another period of progress”.

He added: “We continue to operate with discipline to ensure our business is as resilient as possible: proactively right-sizing recent acquisitions to set them up for long-term profitable growth and driving further automation benefits to exceed our stock reduction targets. “.

Frasers is known for buying up struggling companies (often out of administration) at low prices, such as House of Fraser, Missguided and Savile Row tailor Gieves & Hawkes.

It has also built up stakes in famous but struggling brands, including Mulberry, which it recently tried but failed to fully acquire, Hugo Boss, ASOS and Boohoo Group, which owns Karen Millen and PrettyLittleThing.

Boohoo investors will vote on December 20 on hiring Mike Ashley as chief executive of the online fashion retailer.

Frasers, a 27 per cent shareholder in Boohoo, has urged the Manchester-based company to appoint the tycoon to help revitalize the business, whose shares have plunged more than 90 per cent since peaking four years ago.

Instead, Boohoo nominated Debenhams boss Dan Finley for the role, saying he was the “obvious internal candidate”.

Richard Hunter, head of markets at Interactive Investor, said the dispute with Boohoo and the failed pursuit of Mulberry had been “unwelcome distractions” for Frasers.