Frasers holds guidance despite weak consumer demand

(Sharecast News) - UK retailer Frasers Group held annual guidance despite a fall in half-year profit amid weak consumer confidence and excess inventory which continued to weigh on the sector, leading to heavy discounting.

Adjusted pre-tax profit fell 2.8 percent to £291 million on the back of higher impairments and increased interest costs, although this was offset by a £34 million gain from the disposal of the Coventry Arena and an increase in premiums from strategic investments.

Revenue rose 5 percent to £2.58 billion, driven by international revenue growth of 42.8 percent to £736 million due to the Holdsport and XXL acquisitions. Retail sales rose 5.1 percent year on year to £2.5 billion.

Frasers highlighted "green shoots" in the luxury market as Flannels returned to sales growth with an increase in gross margin through a more relevant product offering and improved inventory holding.

"We've made a solid start to full-year 2026 even though market conditions are tough, consumer confidence is very subdued and excess inventory continues to weigh on the industry, leading to increased promotional activity," said CEO Michael Murray.

For the full-year, Frasers, which has 1,500 UK stores, expects adjusted pre-tax profit of £550 - 600 million, compared with the £560 million it made last year, helped by plans to offset the more than £50 million annual cost increase from tax and wage rises in the UK government Budget last year through efficiencies and synergies.

This forecast now includes the expected loss from XXL ASA, which was left out of prior guidance in July, and the first-time equity accounting of Hugo Boss and Accent Group.

Retail and gross margin both grew by 160 basis points to 46.2 percent and 47.3 percent respectively.

Sales in the premium lifestyle segment fell 3.7 percent to £444.5 million and declined 5.8 percent to £1.32 billion in UK sports retail.

Group retail trading profit rose 12.2 percent to £441 million, also bolstered by acquisitions.

Analysts at broker Shore Capital said that despite the return to top line growth "it seems to us that these numbers are flattered by the acquisitions made by the business and we do see weakness in the core UK Sports Retail and Premium Lifestyle segments".

"While Frasers does reiterate its full-year guidance it is unclear how much is due to underlying trading in-line with expectations versus the other moving parts of what is a complex business," Shore added.

"However, the guidance also now includes the first-time equity accounting for Hugo Boss and Accent Group and it is unclear to us that these were included previously. Thus, the picture on where underlying expectations have moved look murky to us, unhelpful when trying to build investor confidence in the equity story."

Reporting by Frank Prenesti for Sharecast.com

Frasers Group