In its latest set of interim results, both Frasers’ profits and sales outshine those recorded in the pre-pandemic era. Retail Week examines how Frasers has prospered in a difficult trading period.

Frasers store exterior

Frasers’ recent interim results reveal that the retailer’s profit before tax has soared by 75.3% to reach £186m. In fact, the group reported revenue increases across each of its divisions in the half-year period, with sales increasing by 23.6% to £2.3bn, while profits and revenues also surpassed figures recorded for the same period in 2019.

Retail Week speaks to Frasers’ chief financial officer Chris Wootton to discover how the brand has achieved strong growth at a time at a challenging time for the retail industry.

Focus on rebuilding relationships

Frasers has attempted to create strong brand relationships following a rocky past with some of its main suppliers. 

As Wootton explains: “We’ve got a great relationship with our key brand partners now which maybe we’ve not always had in the past. So we are getting better product.” 

This newfound focus is a relatively new approach for Frasers and one attributed to incoming CEO Michael Murray.

Sports Direct

Sports Direct Oxford Street

Murray’s current position as head of elevation has allowed him to transform the appearance of Sports Direct outlets, with Murray previously stating his vision is to create the world’s best sports store, featuring leading brands. 

This relationship-building approach differs from that of current CEO Mike Ashley who had a tumultuous relationship with sportswear brands. In 2019, he called for a European investigation into the market dominance of Nike and Adidas, highlighting “market-wide practices aimed at controlling the supply and, ultimately, the pricing of their products.”

At the opening of Sports Direct’s Oxford Street outlet, Murray said that the new look of the stores was already transforming the group’s relationships with existing brands: “They absolutely love the elevation strategy and love that we are making this huge statement on Oxford Street. It gives them confidence in our commitment and our determination to achieve what we have set out to achieve: to be the number one sporting goods retailer across Europe.”

He added: “Product is always improving. It’s great quality compared to where we’ve come from as Sports Direct. I’ll always be striving for more and better-branded products and access but I’m happy with where we are today in our journey and our elevation strategy.”

This focus on raising Sports Direct to the next level has not gone unnoticed. Following Murray’s appointment as future leader of the group, an industry source told Retail Week: “Getting access to the top brands has always been critical for Sports Direct. Mike Ashley used to talk about one being the wife and one being the girlfriend when it came to Nike and Adidas and trying to keep them both happy.

 “Michael seems to have taken some big strides in building those sorts of relationships.” 

Accessibility 

Frasers Wolverhampton Ralph Lauren

While cost is cited as a potential macroeconomic challenge for the group, Frasers remains confident that interest in luxury products will be maintained even as the cost of living increases in the UK. Its premium living category, under which the Flannels business sits, recorded growth of almost 34% in the period. 

While Wootton acknowledges the increased grip of inflation in recent weeks, he believes that the category will maintain its strong footing as interest in luxury goods has remained steady throughout the pandemic. “Well, no one is going out or going on holiday, why on earth does anyone need a Gucci T-shirt? But apparently they did as it did bloody well. It’s one of those phenomena where people like to wear their wealth these days and are prepared to pay for it,” says Wootton. 

Frasers Wolverhampton skincare (1)

This was also reflected in the expansion of the Flannels beauty hall store format which opened in Sheffield, Liverpool and Leicester, aiming to bring luxury cosmetic brands to new locations outside of London. 

“What it comes down to is that the consumer is so much more educated now than 10 years ago because of social media,” says Wootton. ”Even your consumer in a provincial town somewhere is educated on what Gucci and Prada is as much as someone in London. You’ve got the whole country as your customer, not just your big urban centre.”

Investment and diversification

Despite ongoing challenges, Frasers has continued to invest strongly in its store estate and measures to deal with supply chain challenges. 

As well as opening the Sports Direct flagship and regional Flannels stores, which are performing above expectations, Frasers has completed the purchase of land in Bitburg, Germany where they plan to build a 1 million square foot warehouse. The group has also invested in automation within its Shirebrook warehouse.

Emma Raducanu on court

Emma Raducanu featured in the Sports Direct Christmas TV advert

In order to raise brand awareness, the group has invested in repositioning its brands through marketing campaigns, including its multi-million pound Sports Direct Christmas campaign this year which featured 15 well-known athletes. 

Frasers has also focused on inventory management which has supported it through a difficult time of supply chain challenges.

 “We’ve always invested in inventory as we see the value in doing so, we don’t deliberately invest in it to get over macroeconomic shocks so it just so happens that in macroeconomic shocks, it really really helps,” Wootton concludes.

 “A lot of retailers [are] in the thralls of depression because they’ve run out of stock, we’ve got plenty. That’s because we always make mid-long-term decisions and have never had an issue investing in stock.

Frasers Wolverhampton Evans Cycles

Wootton also says that Frasers’ diverse brand portfolio has also assisted the group during a difficult trading period. 

Even beyond the core businesses of sporting goods and luxury, the company’s peripheral brands have also benefited from lockdown restrictions.

“During lockdown, people were riding a bike, then coming home sitting on their sofa, playing computer games,” Wootton quips. “Well, we’ve got Evans Cycles, Sofa.com and Game. So we’ve got lots of fingers in lots of pies, all in good sectors.” 

This also includes some collaborations within the group, with 18 Sofa.com concessions operating in House of Fraser stores and 105 Game concessions operating in Sports Direct stores.

The demise of the department store

GlobalData retail analyst Kunaal Shah said: “Strong demand for sportswear post lockdown and the closure of rival department stores has helped Frasers Group deliver a strong set of results.”

This marks a further reason for the company’s ongoing growth, helping Frasers and its brands stand out in a sparse competitive landscape

Wolverhampton Frasers

As well as the traditional House of Fraser outlets, the group’s department store offering now includes Flannels, which appeals to a younger demographic.

“Flannels have built their reputation on having designer product that is very logo-driven and appealing to an entry-level fashion consumer,” retail consultant Robert Burke told Vogue Business in 2019.

Frasers is confident that it can achieve an adjusted profit before tax of between £300m to £350m by the end of the financial year, as long as there is no significant lockdown disruption before then. 

With Murray’s quest to transform store appearances and brand perception now in clear focus, the group may have turned a corner as it prepares to be ushered into a new era of leadership in May 2022.