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British retail group Frasers has posted a big jump in annual profits as younger shoppers continued to spend despite the cost of living squeeze.
Chief executive Michael Murray — who is also founder Mike Ashley’s son-in-law — attributed the performance largely to Generations Z and Alpha. Consumers below the age of 30, which make up a large proportion of the group’s shoppers, often save up for the latest product releases to stay “socially relevant”, which has helped boost sales, he said on Thursday.
Murray, who has been leading an “elevation” strategy at Frasers since he took the helm a year ago, said: “They’re obsessed with social media, they’re obsessed with brands, they’re obsessed with their social status and they really want to be associated with the best product.”
The retailer, formerly known as Sports Direct International and which also owns House of Fraser, USC and Evans Cycles as well as luxury department store chain Flannels, expects profits to rise between 5 per cent and 15 per cent up to £550mn this financial year.
It posted a 15 per cent increase in revenue to £5.5bn for the 53 weeks to April 30, while adjusted profit before tax rose 40 per cent to £478mn, with a chunk of the profits coming from property deals. Group gross margin decreased to 42.6 per cent from 43.5 per cent.
Under Murray, the company has been strengthening relationships with brands such as Nike, which has contributed to its overall “record performance”. Ashley still owns 72 per cent of the retailer, which started life as a single store in Maidenhead in 1982.
The chief executive has also continued to snap up shares in other companies, with recent holdings including electrical retailers Currys and AO World and online fashion groups Boohoo and Asos.
“We acquired Jack Wills, which is a significant brand now within our portfolio, we acquired the whole premium division through House of Fraser and Flannels, and we’ve grown that significantly over the last five or six years. So it really is in our DNA to invest and potentially acquire businesses,” he said of the recent investment spree.
Murray added that although “we’re past the worst” of inflation, “it’s definitely not gone away and it’s not going away” and the company was focused on keeping costs as low as possible.
Richard Chamberlain, an analyst at RBC Capital Markets, said Sports Direct should benefit from consumers becoming more price conscious in a downturn, “however, as a fairly low-margin discounter, Frasers is relatively exposed to cost pressures on its business”.
