Frasers Group have today released their financial results for the first half of their fiscal year. For 2019, they announced a jaw-dropping £5.15 billion in revenue. The company pointed to a 40 percent increase in new orders. In total they flew by £2.9 billion on the same period last year, again breaking records at a stellar £19.5 billion. So, while these are indeed positive developments, opportunity and optimism aside, the last year has been a difficult one for Frasers Group and the entire retail landscape.
The findings reveal a strange financial picture for Frasers Group. Yet the company still celebrated a 2% increase in retail profits, to £747.3 million. It at the same time battled a 2.5% decline in group profits, to £808.9 million. This drop can be explained by a staggering 25% increase in operating costs, weighing down profitability. The company’s share dividends increased this year even as profits before tax from continuing operations fell by half. They decreased by 24.3% to £379.4 million.
Frasers Group’s performance reflected a heavy retail revenue impact. It had predicted a 7.4% drop, to £4.75 billion, in the full-year results published in July. As a result, the company noted a sequential improvement in its overall retail gross margin. It jumped by 170 basis points, now hitting 45.6%. London-listed Frasers Group said it would take a hit of £50 million. This is in large part due to the upcoming increases in National Insurance and minimum wage highs.
Frasers Group is currently engaged in a legal battle with Boohoo. The trouble here arises from Boohoo’s choice to rebrand its downmarket fashion label as Debenhams. This turf war of sorts reflects the intense competitive forces operating within today’s retail landscape, where brand and market positioning has never been more important.
Frasers Group isn’t afraid to go against the grain. They have outfoxed rivals by doubling down on Hugo Boss, proving that they are deadly serious about expanding their roster in the luxury space. On the flip side, the UK company has cancelled all of its advances with Revolution Beauty, which is nearly fully held by Boohoo. This decision is a sign of deep cut strategic realignment, as Frasers Group continues its repositioning in a challenging sector.
It’s building division has had an outsized impact on that success. Their incredibly high profit margins have propped up the company’s overall performance by quite a lot. The support services sector delivered a strong 35% pre-tax profit growth. This growth was driven by a 6.9% increase in same store profit from operations margin.
Frasers Group’s H1 pre-tax profits were £20 million above last H1 at £132 million, showing the group’s strength during the highly competitive current market environment. The manufacturer is current pursuing efforts to shore up its lead. The increase in new orders, combined with continued retail profitability, indicates that it is doing a great job at weathering outside pressures.