Mike Ashley’s Frasers Group has warned of “softening” in the global luxury market as underlying sales at its upmarket division, which includes the House of Fraser department stores and Flannels chain, dived more than 11%.
The fall, which does not take into account acquisitions, follows the closure of a further two House of Frasers stores in six months, taking the total to 29, half the number the group bought out of administration in 2018.
However, Frasers, which is controlled by the former Newcastle United owner Ashley, who owns more than 72% of its stock, also opened 18 more of its designer casual wear Flannels stores in the half-year, taking the total to 76.
Michael Murray, the chief executive of Frasers, which also includes Sports Direct, Evans Cycles and the video game retailer Game UK, said sales of luxury goods had been partly affected by the cost of living crisis but the group would “continue to invest with confidence … although it is likely that progress will remain subdued for the short to medium term in the face of a softer luxury market”.
While underlying sales in Frasers’ luxury division fell in the six months to 29 October, total sales – which include acquisitions and disposals – rose 3.1%, helped by the purchase of a suite of 15 brands, including the former Oasis singer Liam Gallagher’s Pretty Green and the 1980s brand Tessuti, from JD Sports a year ago. The group said it had experienced “positive demand due to our unique proposition” despite weakness in the luxury market.
Total retail sales for the group, including Sports Direct, rose 4% in the half-year to almost £2.7bn, behind inflation. However, pre-tax profits rose 8% as the company boosted profit margins at its Sports Direct chain as a result of better relationships with brands such as Nike, which are now providing the chain with more of their most sought-after products.
The group said it was on track to achieve full-year profit expectations as “strong trading momentum continued throughout the first half of [its financial year] and into the early recent weeks of the second half, especially at Sports Direct”.
Frasers said it had also made a £20m profit on the sale of the Missguided brand, which it bought in 2022, to the Chinese fast fashion group Shein.
Despite difficulties on the high street, Frasers has taken advantage of falling values to invest in physical retail property, acquiring shopping centres in Luton, Dundee and Castleford, which it said were “well positioned to unlock future growth opportunities in high-performing retail locations”. Frasers now has such a large suite of brands, from Jack Wills to Evans Cycles, that it is able to repopulate entire shopping centres.
Murray, the former club promoter and property adviser who took the reins from his father-in-law Ashley in May last year, said he was gaining further experience of working in retail by spending time serving at Sports Direct’s Oxford Street store in London – which is opposite the group’s base in the capital.
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He said that in future all head office staff would spend at least two days a year working in stores or the group’s warehouse.
Meanwhile, the group is planning to shift its headquarters from Shirebrook in Derbyshire, which also houses the group’s main warehouse and distribution centre, to Rugby, Warwickshire.
Murray said the group had submitted planning for a “state-of-the-art campus which would give us the scale to grow” and “a world-class platform to further bolster our sector-leading ecosystem and growth ambitions”.
