Sports Direct – renamed Frasers Group as of today – says half-year results show its strategy of multichannel elevation is the right one for the business.
During the half-year it has opened new flagship stores, including a new Flannels store in September. Chair David Daly said the business had had “amazing feedback from various stakeholders including the brands.” It is now on track to complete its store refurbishments by the of the current financial year and says that its completion of the purchase of the Fraser store in Glasgow “will allow us to showcase our elevation strategy and intention for the remaining portfolio of stores.”
The retail group this morning voted at a shareholders meeting to change its name to Frasers Group, reflecting a move upmarket that it has previously said was urged by the brands that it sells.
Today Michael Murray, head of elevation at the newly-renamed Frasers Group, said: “The group is evolving dramatically, moving us away from what was our core focus on sports. With the business now looking and feeling so different – with new product ranges, brand propositions and an increased focus on luxury – it was clear that we had to look at our plc brand and assess whether it was appropriate as we elevate the business. For us the logical next step was to change the name and logo to reflect our aspiration.
“The results out today point clearly to the fact that our elevation strategy is now paying dividends. No-one ever said you can transform a business overnight and have always acknowledged that this is going to be a long journey, but the foundation is now place. We are investing across the group from new elevated store propositions for Sports Direct itself, as well as Flannels and our plans for HoF are now well advanced. The name change shareholders have voted for today is part of this programme; we expect it will take approximately six months for the full transition to take place.”
Murray added: “This is not just a case of giving the group a new name. It is about fundamentally changing the perception of the business, a process that will take time and investment over a long period. It demonstrates the group’s commitment to the transformation of the company as a whole as it embarks on its ambitious elevation strategy and its vision for the future. The company is fully behind the strategy as this vote demonstrates, and is looking forward to a bright future at Frasers Group.”
Focus on the figures
The news came as Sports Direct International reported revenue of £2.04bn in the half-year to October 27 2019. That’s 14% up on the same time last year. However, sales growth was largely driven by new acquisitions and when those acquisitions were stripped out, underlying group revenue was down by 6.4% as a result of investment in its strategy of multichannel elevation.
UK sports retail remained the largest retail division within the group, where top-line sales of £1.2bn were 6.2% up on last time, mainly, Sports Direct said, as a result of the acquisitions of brands including Evans Cycles, Jack Wills, Sofa.com, and Game Digital UK. The division also includes all of its online business. But revenue in this division was down by 8.6% once those acquisitions were discounted.
The fastest sales growth was in premium lifestyle, where sales of £282.6m were 79.2% up on last year, largely as a result of a first full-year of ownership of House of Fraser following its acquisition out of administration in August 2018. European retail sales of £365.5m were 16.7% up on last time. Wholesale and licensing sales were also ahead at £92m, 14.9% up on last time. But rest of the world retail revenue was down by 8.5%, following the rationalisation of its Bob’s stores business in the US.
Pre-tax profits of £193.4m were 160% up on last time’s £148.8m, driven both by improved trading and the profit from its sale and leaseback of its Shirebrook campus.
House of Fraser
The retailer says that department store House of Fraser is now “all but fully integrated” into its business, but that it is a work in progress. Teams from buying to retailing and others are now running as one business in the Sports Direct Group. Final decisions on the size of the store estate are yet to be made but Sports Direct chief executive Mike Ashley said he would expect the number of retained stores to continue to reduce in the next 12 months.
He said: “A lot has been made about my comments regarding the ‘terminal’ nature of House of Fraser’s problems. For absolute clarity, as shown by the fact House of Fraser went into administration and indeed was mere hours from liquidation such was its parlous state, the business was dead, finished, destroyed. It was, and it is only through the incredible efforts of those within the Sports Direct Group, including the remaining House of Fraser teams, that we are tackling these problems and trying to build a business with a future, a future for Frasers that is hopefully ’bright’”.
Sports Direct bought gaming business Game Digital in its latest half-year and now aims to expand the number of Belong esports arenas both within Game and other businesses in the group. “We continue to believe that BELONG, when looked at against typical retail metrics and in an area where competition is starting to emerge, is not a significant profit-driver on its own,” said Ashley. “It can only be a viable business proposition as part of the wider group where BELONG can be combined with a focus on experiential retail creating a halo effect within stores and other physical locations.”
He said that Game would “struggle to weather the pressures that it is facing in its sector” as a standalone business.
Ashley says that the current business rates regime is “helping to kill much of what remains of the UK high street” – and it is now asking for reform before it is too late. As it stands, he says, the hugely complex system punishes larger stores and benefits smaller ones – but it is the largest stores that bring footfall to the high street. “Therefore it would be fairer and more advantageous to all businesses whether directly or indirectly, for there to be a single approach to tapering relief, regardless of a property’s size,” he said.
House of Fraser and Evans Cycles are Leading retailers in IRUK Top500 research, while Game is ranked Top100 and Sports Direct Top150.
Image courtesy of House of Fraser/Sports Direct International