Frasers Group cuts profit forecast amid economic turmoil

In the United Kingdom, Frasers Group announced a downward revision of its profit guidance following challenging trading conditions and a decline in consumer confidence. This announcement was made on December 5, 2024, and follows the UK Government's Autumn Budget, where significant increases to the National Minimum Wage and employer National Insurance contributions were introduced by Chancellor Rachel Reeves. As a result, Frasers now expects adjusted pre-tax profits for the financial year to be between £550 million and £600 million, a decrease from the previously projected £575 million to £625 million. The budgetary changes are set to incur an additional £50 million in costs for Frasers starting from the 2026 fiscal year. The group's shares dropped significantly, plummeting 10.2% in midday trading to 665.5p, marking it the biggest faller in the FTSE 100 Index. Compounding these issues, Frasers Group is expected to exit this blue-chip index in the upcoming reshuffle. The company has faced a variety of operational challenges; their operating profits fell by 10.5% to £266.8 million for the six months ending October 27, 2024. Total turnover also saw a decline, down by 8.3% to around £2.5 billion, with half of this drop attributed to decreased revenues in its UK sports retail sector, which includes brands like Game UK and Studio Retail. Frasers has been strategically moving away from low-margin sales, intensifying efforts to streamline its offerings. Outside of the UK, the company has experienced weaker demand from international operations such as Sportsmaster in other countries and Game Spain, particularly due to the end of the current game console cycle. Despite these setbacks, Chief Executive Michael Murray emphasized a commitment to maintaining business discipline and fostering a resilient operation. Frasers Group has been integrating recent acquisitions with a focus on long-term profitable growth and automation benefits to meet stock reduction targets. Currently, it holds significant stakes in struggling yet prominent brands, including Mulberry, Hugo Boss, ASOS, and Boohoo Group. The ongoing conflict over Boohoo’s leadership has also created distractions, especially as Frasers has proposed Mike Ashley for the role of chief executive but faced rejection. Investors in Boohoo are scheduled to vote on this leadership issue on December 20, 2024.