Mike Ashley's Frasers Group scores with bumper profit haul but warns over cost-of-living impact: reaction

Sports Direct owner Frasers Group has posted bumper profits and expects further progress, despite cautioning over inflationary and supply chain pressures.

The Mike Ashley-founded business, which also runs House of Fraser and Game stores, hailed a strong full-year performance despite a “significant increase” in running costs.

The company reported adjusted pre-tax profits of £344.8 million for the year to April, compared with a £39.9m loss in the previous year.

It lifted its targets for the current financial year, telling investors that it expects to post an adjusted pre-tax profit of between £450m and £500m over the current financial year.

Nevertheless, the retail giant warned that challenges with supply chains and the increased cost of living “could have an impact on business potential”.

The group also made fresh calls for the government to overhaul “a fundamentally flawed business rates system”.

Revenues jumped by 30.9 per cent to £4.75 billion for the year, as it was boosted by the reopening of stores following pandemic restrictions.

Frasers, which is also behind the Flannels brand, has since started the new financial year under the leadership of new chief executive Michael Murray, after Ashley stepped back into an executive director role.

The vast Mike Ashley retail empire includes the flagship House of Fraser store on Glasgow's Buchanan Street. Picture: John Devlin

Murray, the founder’s son-in-law, was promoted to the position after leading Frasers’ so-called “elevation strategy” as the firm has looked to grow its premium division.

He said: “I am really proud of the record performance we’ve announced today. It's clear that our elevation strategy is working and we are building incredible momentum with new store openings, digital capabilities and deeper brand partnerships across all of our divisions.

“We’ve got the right strategy, team and determination to keep driving our business from strength to strength.”

He added: “Our elevation strategy has remained laser focused, and we have re-structured our team to execute it with conviction. It is underpinned by our core strengths and rock-solid foundations.

“Although the backdrop remains challenging, this momentum gives us the confidence of achieving adjusted profit before tax of between £450m and £500m for the next financial year.”

The group said it had returned £193.2m to shareholders through a “significant” share buy back programme.

Laura Hoy, equity analyst at investment platform Hargreaves Lansdown, said: “Frasers is betting big on a return to in-person shopping, with what CEO Michael Murray dubbed to be a ‘conservative’ forecast for underlying profit growth of 30 per cent or more.

“He’d have been forgiven for treading lightly given the inflationary cost pressures, cost-of-living crisis and ongoing structural decline of department stores. But instead the bold move suggests the group’s doubling down on its efforts to bring back the allure of physical shopping experiences.

“Only time will tell whether Murray’s optimism is grounded in reality – we question whether omnichannel experiences are enough to lure shoppers back into stores.”

Russ Mould, investment director at AJ Bell, noted: “One would have guessed sportswear and equipment sales might be vulnerable to a deteriorating economic climate, yet Frasers remains relatively upbeat. It’s not a bad start for Michael Murray as the new chief executive, who has some big shoes to fill after taking over from father-in-law Mike Ashley.”