AUS
NZ
UK
CA
USA
FRA
GER
ESP
ITA
NLD
PRT
SWE
GRC
IND
POL
BRA
ZAF
RUS
CHN
UAE
Summary
- Frasers has withdrawn its earlier guidance of a 20-30 per cent improvement in underlying EBITDA.
- Shares of UK retailers dropped in the wake of Tier 4 restrictions in London, South East, and East of England.
The plight of high street retail does not seem to be ending anytime soon in the wake of regular new developments in coronavirus pandemic. The coronavirus induced lockdown looks to weigh down heavily on the overall retail sector. All the non-essential retail in London, South East, and East of England have been asked to shut operations from Sunday 20 December without any prior notice.
In view of this development, Mike Ashley’s Frasers Group Plc (LON: FRAS) has withdrawn its earlier guidance of a 20-30 per cent improvement in underlying EBITDA during the FY2021. The company had expected to leverage upon its online business model in order to achieve an underlying growth in its profit figures for FY21. However, yet another uninformed lockdown has pushed the company to withdraw its earlier guidance.
The Board of Frasers Group said that it could no longer commit to achieving its earlier published guidance in the wake of sudden lockdown and amid the high likelihood of further rolling lockdowns nationwide over the following months. Notably, this period is the peak trading period for the overall retail sector.
Also read: Mike Ashley’s Frasers Group Gets Investors Support for Staff Bonus Scheme
Fraser Group’s Financials
During the first half of FY21, Group revenue was down by 7.4% year-on-year primarily due to temporary store closures with a decrease in UK SportsRetail revenue of 9.8% year-on-year, and a decrease in European Retail revenue of 3.7%. In this period, the company has maintained a product margin with an increase in gross margin at 44.0% (H1 FY20: 43.8%).
Led by growth in the online business, and the new Flannels stores, the group has reported EBITDA increased by 23.1% year-on-year. The company witnessed a strong balance sheet, with an increase in underlying free cash flow (pre-capex) of 56% year-on-year and a decrease in net debt of 32% (as compared with the previous period). In addition, the company has not declared any interim dividend as well as no share buyback took place during H1 FY21.
The Frasers Group has stated that it aspires to lead the competition as a sporting goods retailer in Europe. To beat the lockdown menace, the company intended to invest in the digital elevation without a limit strategy and bolster its online operations.
The imposition of Tier 4 restrictions has led to closing almost all the non-essential retail in London and parts of the southeast and east of England. This has happened for the third time this year that all the non-essential retail, including leisure and entertainment venues, have been asked to shut shops without any advance notification. Moreover, some parts of the UK are also under complete lockdown, where retailers might get impacted significantly.
As the fashion retailer withdrew its guidance, shares of Mike Ashley owned company took a hard beating as they plunged by more than 10 per cent on 21 December. The impact of the new lockdown also impacted other retailers as Next Plc (LON: NXT), JD Sports (LON: JD.), and Marks & Spencer (LON: MKS), which fell by 3%, 3%, and 4%, respectively.
