Frasers Group PLC reported revenues declined 7.4 percent in the six months ended 25 October 25 to £1,893.3 million, largely caused by temporary store closures due to COVID-19, offset by the strong reopening of stores after lockdown and growth in its online business.

The company’s major chain is Sports Direct. In the U.S., businesses include Bob’s Stores and Eastern Mountain Sports.

Gross margin for the Group increased 20 basis points to 44.0 percent as product margins were maintained over the period.

Underlying EBITDA is up 24.9 percent, largely driven by the strong reopening of stores after lockdown, growth in its online business, new Flannels stores, a full year of trade of the prior year acquisitions, and continued operating efficiencies. Excluding acquisitions and on a currency-neutral basis, underlying EBITDA is up 18.8 percent.

Underlying profit before tax increased 43.7 percent to £146.3 million. Reported profit before tax increased 17.6 percent to £106.1 million.

In the UK Sports Retail segment, revenue decreased 9.8 percent to £1,071.6 million. Excluding acquisitions, revenues fell 12.6 percent. This was largely due to the temporary store closures in the UK caused by COVID-19, offset by growth in its online business.

Gross margin increased to 44.4 percent, as product margins were maintained and continued to improve.

Underlying EBITDA for UK Sports Retail was £151.4 million, an increase of 6.7 percent for the period, largely due to the strong reopening of stores after lockdown, growth in our online business and improved operating efficiencies.

UK Sports Retail includes core sports retail store operations in the UK plus all the Group’s sports retail online business (excluding Bob’s Stores, Eastern Mountain Sports and Malaysia), the gyms, the Group’s Shirebrook campus operations, GAME UK stores and online operations, and retail store operations in Northern Ireland. UK Sports Retail is the main driver of the Group trading performance and accounts for 57 percent of Group revenue.

In the Premium Lifestyle Segment, revenue grew 4.8 percent to £320.4 million. This was largely due to new Flannels stores, increased web sales and a full period of the prior year’s acquisitions of Jack Wills and Sofa.com offset by the temporary store closures due to COVID-19. Excluding acquisitions, revenue fell by 0.7 percent.

Gross margin decreased to 47.0 percent driven by a reduction in concession sales within House of Fraser as a percentage of total sales which have a higher gross margin.

Underlying EBITDA for Premium Lifestyle improved from a loss of £7.6 million in FY20 H1 to a profit of £28.4 million for the period, largely due to Flannels store openings, a full period of trading for prior year acquisitions, continued operating efficiencies, and business rates relief particularly in House of Fraser.

Premium Lifestyle consists of Flannels, Cruise, van mildert, House of Fraser, Jack Wills, and Sofa.com banner stores and corresponding web sales.

In the European Retail segment, revenue decreased 3.7 percent to £352.0 million. On a currency-neutral basis and excluding acquisitions, European Retail revenue decreased by 12.3 percent largely due to temporary store closures as a result of COVID-19.

Gross margin increased to 41.7 percent, as product margins were maintained. Underlying EBITDA was £25.1 million, a decrease of 23.7 percent for the period, largely due to temporary store closures caused by COVID-19.

The European Retail division includes the Group’s sports retail store management and operations in Europe, including the Group’s European distribution centers in Belgium and Austria, stores in the Baltic regions and GAME Spain stores.

In the Rest Of World Retail segment, revenue decreased 16.3 percent to £77.1 million. Gross margin increased to 39.6 percent from 39.4 percent. Underlying EBITDA was £10.4 million, compared to a loss of £2.5 million in FY20 H1, largely due to operating efficiencies in the US businesses.

Rest of World Retail includes sports stores in Malaysia trading under the Sportsdirect.com banner and retail stores in the U.S. trading under Bob’s Stores and Eastern Mountain Sports along with its e-commerce sites. In Malaysia, the stores are 51.0 percent owned by the Group.

David Daly, non-executive chair, said in a statement, “Our results in this half-year have been pleasing, particularly given the fact our stores in the UK were virtually all closed until mid-June. In an industry sector blighted by the decline of the High Street, we are really proud of our performance and our people who helped us get there. Unfortunately, given we entered the further lockdown in England right after our half-year date, and given the current rolling lockdowns we may be under for some time, we have had to be conservative with our judgments. The coming months will continue to be tough, but we are well prepared and positioned for the future.”

Regarding its outlook, Fraser Group said, “The successful reopening of stores in England on December 3, 2020 combined with continuing strong online performance means we can confidently raise the bottom end of our full-year guidance for FY21. We now believe the Group will achieve a 20 percent to 30 percent improvement in underlying EBITDA during FY21.”

Photo courtesy Sports Direct/Bloomburg