Frasers Group’s full-year results on Thursday were headlined ‘Building a broader platform for multi-year, sustainable profitable growth’, and when companies talk that way, it usually means profit is down, which was the case for the 12 months to late April.

But it doesn’t seem there’s much to worry about with the well-funded group investing heavily — very, very heavily — in the “broader platform” both through its ongoing elevation strategy and its fondness for both company acquisitions and stake-building in other businesses.

So let’s look at the headline numbers. Group revenue fell 7.4% to £4.925 billion with UK Sports Retail down 7.2% at £2.698 billion, Premium Lifestyle down 14.8% at £1.048 billion and International Retail up 1.3% at £1.007 billion. Property revenue rose 19.1% to £86.6 million and Financial Services dropped 23.2% to £85.3 million.

The retail gross margin and group gross margin both rose and retail profit from trading was up 2% at £747.3 million. But group profit from trading fell 2.5% to £808.9 million. 

Operating profit was up 8.2% at £557 million but reported profit before tax fell 24.3% to £379.4 million. However, adjusted profit before tax (APBT) rose 2.8% to £560.2 million.

CEO Michael Murray said he was “pleased… despite the headwinds caused by last year’s Budget”.  He said the elevation strategy “drove another record year of profitable growth” and it “accelerated international expansion… to further build Sports Direct into a truly worldwide proposition”. 

Its “relationships with the world’s best global brands”, including Nike, Adidas and Hugo Boss (in which it holds a large stake), “are the strongest they have ever been, and our ambitious growth plans are now strengthening and scaling these partnerships even further”. 

Also, credit offer Frasers Plus “is going from strength-to-strength and is on track to meet its long-term ambitions”.

Murray added that for FY26, the group is seeing “positive momentum across the group, including strong performance at Sports Direct”. 

He’s currently expecting FY26 APBT in the range £550 million-£600 million excluding the results of XXL ASA, acquired in June.

Profits down

So what caused the reports profits drop? It was affected by one-off gains last year not being repeated this time and other one-off costs. Foreign exchange losses (vs gains in FY24) also had an impact and “non-cash fair value movements on equity derivatives, primarily relating to the material decline in the Hugo Boss share price” were an issue.

And those negative revenue figures? It said “planned declines” in parts of the business had an impact “as previously unprofitable businesses were right-sized and put on a more sustainable footing”. Continued sales growth from Sports Direct and the acquisition of Twinsport weren’t quite enough to make up for those negatives. Also, the luxury market “continued to be challenging although it is now showing some early signs of improvement”.

UK Sports makes up 54.7% of group revenue and as well as falling in single-digits, gross profit dropped by £50.8 million due to the sales decline. But the gross margin rose as the higher-margin Sports Direct business now makes up a greater proportion of the segment. Operating costs fell and contributed to a £7.4 million (1.6%) increase in the segment’s profit from trading.

Premium Lifestyle makes up 21.3% of group revenue and includes the Flannels chain plus its department stores and some acquisitions. The double-digit revenue fall came as it “continued to optimise our store portfolio in House of Fraser and in the businesses acquired from JD Sports”, reducing the number of stores from 44 to 28.

On the plus side, the segment’s profit from trading increased by £20.2 million as a gross profit fall due to lower revenue was more than offset by a gross margin rise. This was due to an improving mix effect with Flannels increasing its share. There was also a £64 million decrease in operating costs.

International growth

International Retail now accounts for 20.5% of group revenue and its 1.3% revenue rise was due to growth from the Sports Direct International business and the Twinsport acquisition, partially offset by Sportmaster, which was integrated in FY24. Segment profit from trading fell by £13.1 but gross profit rose by £6.9 million. However, overhead costs increased by £20 million.

And the company said that “working with our global brand partners, FY25 was a breakthrough year for our international growth ambitions for Sports Direct, both deploying our consistently strong cash flow and signing capital-light partnerships”. 

And those ambitions are lofty. It extended its partnership with MAP Active and plans 350 new stores, moving further into Indonesia plus five new countries: India, the Philippines, Thailand, Vietnam, and Cambodia. 

In ANZ, it increased its stake in Accent Group to almost 15% (and to 19.57% after year-end), and a strategic partnership includes plans for at least 50 Sports Direct stores with a long-term objective of 100. 

It also signed a new partnership with GMG, targeting 50 new Sports Direct stores in the Gulf/Egypt over the next five years. It announced Holdsport in South Africa/Namibia (completed after year end), and a significant shareholding in Hudson, providing expansion opportunities into Africa/Malta. It also completed the acquisitions of Twinsport in the Netherlands and, after year end, XXL in Scandinavia. 

Property was an obvious plus point in the figures mentioned earlier and although it only makes up 1.8% of total group revenue, “property investment remains a key focus for the group, unlocking occupational demand for our retail business whilst delivering strong returns that can be recycled at the appropriate time”.

Properties it has acquired include the Castleford shopping centre, Doncaster’s Frenchgate, Exeter’s Princesshay, Maidstone’s Fremlin Walk, and Affinity outlets. Segment profit from trading increased by £5 million, but additional rental income was partially offset by a £5.8 million increase in operating costs.

As for Financial Services, it accounts for 1.7% of total group revenue, but it sees “a great opportunity for Frasers Plus as a new revenue stream”. It “continues to make good progress” towards it bold long-term ambitions and added 507,000 new customers in FY25. Frasers Plus also accounted for 12.2% of UK online sales. Post year-end, the active customer base has passed a million and penetration has increased to 18.9%.