Frasers Group’s first half is ‘solid’, conditions tough but sees ‘green shoots’ of luxury recovery

Frasers Group’s first-half results were released on Thursday with the company talking of a “solid” six months as it made “progress on margins, cost savings and international expansion”, but saw “tough market conditions continuing into the second half”.

For the period to 26 October, revenue was up 5% to £2.581 billion, driven by international revenue growth. But adjusted profit before tax (APBT) fell 2.8% to £290.9 million.  

Although revenue increased overall, the performance in different parts of the business varied quite widely. In UK Sports Retail (that is, Sports Direct), revenue dropped 5.8% to £1.328 billion, while in Premium Lifestyle (dominait was down 3.7% at £444.5 million. As mentioned, International Retail grew strongly, very strongly in fact, with an increase of 42.8% to £736.5 million. It benefitted from the acquisitions of Holdsport in May and XXL in June, partially offset by the disposal of the MySale business in May.

Retail revenue was up 5.1% at £2.509 billion and property revenue increase 47.7% to £38.7 million. But financial services revenue was down 26.7% at £33.5 million.

The retail gross margin increased from 44.6% to 46.2% and the group gross margin rose from 45.7% to 47.3%.

Retail profit from trading was up 12.2% at £411.4 million and group profit from trading was up 11.6% at £447.9 million.

As mentioned, the APBT figure edged down but reported profit before tax from continuing operations almost doubled to £412.1 million.

The company said that the increase in the group and retail gross margin was driven by an improved product and retail mix in both UK Sports (+140bps improvement) and Premium Lifestyle (+410bps improvement), as the core Sports Direct and Flannels businesses continued to grow as a proportion of group sales.

It added that it’s seeing “green shoots in the luxury market as Flannels returned to sales growth”. In fact, Premium Lifestyle’s profit from trading was up 9.2% at £61.5 million.

But its retail revenue rise was more than offset overall by planned declines in Game UK, Studio Retail, House of Fraser, and the businesses acquired from JD Sports. 

Acquisitions and investments

The company continued to make acquisitions and open stores during the period and successfully completed the aforementioned acquisitions of Holdsport in South Africa and XXL in the Nordics. It also recently opened its first stores with partners in Malta, Australia and the Middle East. It continued to invest in UK Sport, demonstrated by the opening of its biggest Sports Direct flagship store in Liverpool, and in luxury as it invested in The Webster, the multi-brand retailer in the US.

The group made further UK property investments at attractive yields too, with new shopping centres and retail park acquisitions including sites at Greenock and Almondvale. After period end, it completed the £217.6 million acquisition of Braehead retail park near Glasgow.

The group said that the consumer environment remains challenging, “and although trading has improved compared to last year’s Budget-affected period, it is still weaker than FY24, with excess inventory in the sector continuing to weigh on the wider market”.

It’s “working hard to offset the £50 million+ incremental annual costs from last year’s Budget through disciplined savings, synergies and efficiencies”, and continues to expect FY26 APBT of £550 million to £600 million. This includes the expected loss from XXL ASA and the first-time equity accounting of Hugo Boss — in which it has a large stake — and Accent Group.

CEO Michael Murray said of all this: “We’ve made a solid start to FY26 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. 

“While we remain cautious into the second half, our focus is unwavering as we confront these challenges head-on, and we are today re-iterating our FY26 APBT guidance. 

“We are continuing to invest boldly in our Elevation Strategy-deepening brand partnerships, elevating our product mix, opening new Sports Direct stores internationally, and acquiring strategic properties to strengthen our portfolio. These steps reinforce our ambition and give us real confidence in the substantial long-term opportunities ahead for the group.”