Frasers Group blames Budget for decrease revenue steering

Frasers shares tumbled on Thursday as the Sports Direct owner lowered its profit guidance and the retail giant prepared for relegation out of the FTSE 100. 

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 anticipates its adjusted pre-tax profits will total £550million to £600million this financial year, down from previous guidance of £575million to £625million.

Chancellor Rachel Reeves announced hikes to the National Minimum Wage and employer National Insurance contributions during her first Budget, raising ire among many retailers.

Because of these changes, Frasers expects to incur another £50million of incremental costs from the 2026 fiscal year.

Frasers plummeted 10.2 per cent to 665.5p by midday, making them the FTSE 100 Index’s biggest faller by some distance.

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

Forecast: Frasers Group shares tumbled on Thursday morning after the Sports Direct owner lowered its profit outlook amidst difficult trading in recent months

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

Total turnover fell by 8.3 per cent to around £2.5billion, with around half the drop caused by shrinking revenues at its UK sports retail arm, where Frasers has been reducing low-margin sales at Game UK and Studio Retail.

In its premium lifestyle business, home to Jack Wills and Sofa.com, the company’s sales dived 14.1 per cent to £472.7million amidst a shakeup at House of Fraser stores and the brands bought from JD Sports two years ago.

Outside Britain, revenues were impacted by weaker demand at its Sportsmaster and Game Spain, with the latter affected by the conclusion of its 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 profitable long-term growth and driving further automation benefits to exceed our stock reduction targets.’

Frasers is known for buying distressed firms – often out of administration – at low prices, such as House of Fraser, Missguided, and Savile Row tailor Gieves & Hawkes.

It has also accumulated stakes in famous but struggling brands, including Mulberry, which it recently attempted but failed to fully acquire, Hugo Boss, ASOS, and Boohoo Group, the owner of Karen Millen and PrettyLittleThing.

Boohoo investors will vote on 20 December on whether to hire Mike Ashley as the online fashion retailer’s chief executive.

Frasers, a 27 per cent shareholder in Boohoo, has urged the Manchester-based company to appoint the outspoken tycoon to help revitalise the business, whose shares have plunged by over 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 failed pursuit of Mulberry had been ‘unwelcome distractions’ for Frasers.