Frasers Group blames Budget for lower profit expectations

Frasers shares plummeted on Thursday as the Sports Direct owner cut its profit forecasts and the retail giant prepared for relegation from the FTSE 100.

The group told shareholders that consumer confidence and trading conditions had been ‘tougher’ before and after the UK government’s autumn budget.

Mike Ashley’s retail empire now expects adjusted pre-tax profits to reach £550 million to £600 million this financial year, compared with previous guidance of £575 million to £625 million.

Chancellor Rachel Reeves announced increases to the national minimum wage and employers’ national insurance contributions during her first budget, angering many retailers.

As a result of these changes, Frasers expects to incur a further £50 million in additional costs from fiscal year 2026.

Frasers tumbled 10.2 per cent to 665.5p by midday, making them the biggest faller on the FTSE 100 Index by some distance.

The group will disappear from the blue chip index in this month’s reshuffle.

The Derbyshire-based group announced that operating profits fell 10.5 percent to £266.8 million in the six months ended October 27.

Total sales fell 8.3 percent to around £2.5 billion, with around half of the decline driven by shrinking revenues at its UK sports retail business, where Frasers has cut low-margin sales at Game UK and Studio Retail.

In its premium lifestyle business, home to Jack Wills and Sofa.com, the company’s turnover fell 14.1 per cent to £472.7 million, amid a shake-up at House of Fraser stores and brands which were purchased from JD Sports two years ago.

Outside the UK, revenues were affected by weaker demand at Sportsmaster and Game Spain, with the latter hit by the end of the current games console cycle.

Despite weaker sales, Frasers chief executive Michael Murray said this period “has been another period of progress”.

He added: “We continue to operate in a disciplined manner to ensure our business is as resilient as possible. We are proactively adjusting recent acquisitions to position them for long-term profitable growth and driving further automation benefits to exceed our inventory reduction targets.”

Frasers is known for buying distressed companies – often out of administration – at low prices, such as House of Fraser, Missguided and Savile Row tailor Gieves & Hawkes.

It has also built stakes in well-known but struggling brands including Mulberry, which it recently tried but failed to fully acquire, Hugo Boss, ASOS and Boohoo Group, which owns Karen Millen and PrettyLittleThing.

Boohoo investors will vote on December 20 on whether to appoint Mike Ashley as CEO of the online fashion retailer.

Frasers, a 27 percent shareholder in Boohoo, has urged the Manchester-based company to appoint the outspoken tycoon to revive the company, whose shares have fallen more than 90 percent since their peak four years ago.

Instead, Boohoo nominated Debenhams boss Dan Finley for the role, saying he was the ‘obvious internal candidate’.

Richard Hunter, head of markets at Interactive Investor, said the dispute with Boohoo and the failed pursuit of Mulberry were “unwanted distractions” for Frasers.