Frasers Group boss Michael Murray explains how it will maintain momentum to navigate its way through the cost-of-living crisis, inflation, supply chain challenges and battered consumer confidence

Michael Murray, chief executive, Frasers Group

Michael Murray plans to accelerate Frasers’ progress

After a week peppered with spilling losses, profit warnings and strategic rethinks in the retail world, Frasers Group struck a much more upbeat note in the City.

Mike Ashley’s sprawling retail group, which owns businesses ranging from Flannels and Frasers to Sports Direct and Sofa.com, delivered a spike in pre-tax profit to £366.1m during the 52 weeks to April 24, up from £8.5m a year ago. 

The retail group also insisted that despite “the many significant economic factors that are headwinds on the business”, it was confident of building on “incredible momentum”, raising profit guidance for its current financial year to between £450m and £500m.

Majority shareholder Ashley, now an executive director of the group, said back in the summer of 2019 that, while the Sports Direct business he founded provided the “engine” of the broader group, the “next generation” of leaders he was assembling – now headed by his son-in-law Michael Murray – were focused on “putting the beautiful, shiny new car on the outside”. 

On Thursday, new chief executive Murray embarked on his first lap of Fleet Street since hopping into the driving seat of that metaphorical new model. 

But far from taking his foot off the gas after a record year, Murray plans to accelerate Frasers’ progress and maintains confidence that the group can swerve the potential roadblocks of a cost-of-living crisis, surging inflation, supply chain challenges and battered consumer confidence to remain firmly on track. 

Diverse proposition 

From the ‘pile it high, sell it cheap’ retail foundations Ashley built over decades, Frasers Group now sprawls from the value end of the market – think Sports Direct, Studio and recently acquired fashion etailer Missguided – to the luxury department store chain Flannels, operating across three core categories: sports, premium lifestyle, and wholesale and licensing.  

Murray’s elevation strategy, which includes improving the look and feel of physical stores, enhancing merchandising and marketing, and building stronger relationships with major brands, has allowed it to gain access to the best products at higher price points across the group. 

“Within each of our pillars, we have a good-better-best offering, so that consumers can trade up or trade down to meet their financial needs”

Michael Murray, Frasers 

But it has also retained value brands such as Slazenger and Kangol – staples of the Sports Direct offer of old – to provide customers with choice across all price points. This, Murray believes, will play a crucial role as the cost-of-living crisis bites.   

“Our positioning and our diversification across three key segments – where we’ve got very strong brand relationships – gives our consumers choice,” he tells Retail Week.  

“Within each of our pillars, we have a good-better-best offering, so that consumers can trade up or trade down to meet their financial needs.” 

Asked if customers were already trading down, Murray says Frasers’ cohort of retailers “haven’t seen major effects yet”, but he believes the group is well-placed to cater for changing consumer needs if and when they tighten their purse strings.  

Brand relationships

Frasers Belfast

Murray says Frasers now favours a collaborative approach to working with brands 

Frasers trumpeted that the retailer’s relationships with major brands such as Nike, Adidas and Hugo Boss – in which it holds an interest worth £770m through shares and put options – are “deeper and stronger than they have ever been”.

The retailer says those relationships will allow it to “continue improving our product offering” and attract “new and innovative brand partners” to work with it.  

Murray insists “everything is collaborative now – it’s not transactional” when describing Frasers’ work with big-name brands.

“We discuss where we are opening new stores, we discuss how they are going to look, the areas [the brands] are positioned, the product, the marketing,” he explains. 

He says that a collaborative retailer–supplier culture has helped Frasers to secure high-profile sporting names such as US Open tennis champion Emma Raducanu for its Christmas campaign and England men’s football captain Jordan Henderson ahead of last summer’s delayed European Championships. 

“We are working with the brands in a much more considered way than we ever have done and that partnership leads to a better commercial relationship,” Murray adds.

“These brands are very protective of the image of how their brands show up and us portraying their brands in the best possible light puts us in the best possible position to capitalise on future growth with them.”

The renewed strength of those relationships could prove crucial for Frasers during a downturn if both parties can work together to navigate additional costs and turbulent trading, and maintain supply.

Investment in stores

Wolverhampton Frasers

Source: JSP

Frasers unveiled its ‘department store of the future’ in Wolverhampton in 2021

Another central pillar of Murray’s elevation strategy has been Frasers’ investment in new openings and store refurbishments. 

It has ploughed £10m into revamping its Sports Direct flagship on Oxford Street, for example, opened a new flagship in Birmingham, launched its Frasers ‘department store of the future’ in Wolverhampton and made a splash with its new Flannels sites in Liverpool and Sheffield.

Murray insists that Frasers remains a “big believer” in physical retail, despite the “significant headwinds” of business rates and the increasing costs of construction and shop fits.

“We strongly believe in giving our consumers an experience in a physical environment, with the world’s best brands”

Michael Murray, Frasers

He says the return to physical stores following the Covid-19 pandemic has been a “consistent theme across all” its formats, with high street sales and footfall growing “a lot more than we anticipated”. 

As a result of those trends, Murray says: “We are very committed and will continue to invest, where it makes sense, in new stores and refurbishments. We strongly believe in giving our consumers an experience in a physical environment, with the world’s best brands.

“In our Flannels division, we are bringing in F&B, new categories such as beauty and also experiences on our activewear floor with Barry’s Bootcamp to offer a real point of difference for consumers to visit our stores.” 

Convincing customers to part with a shrinking purse of disposable cash will be increasingly difficult as food and energy bills spiral. But Frasers is kitting out its flagships in a way that could lure in shoppers, even during the darkest of times. 

Savvy acquisitions

Frasers Group has been one of the most acquisitive businesses, not just in UK retail but in the UK full stop, over the past few years.

Having initially appeared to take a scattergun and reckless approach to purchases like USC, Sofa.com, Jack Wills and Evans Cycles – Ashley even admitted, back in 2019, to regretting the £90m rescue deal for House of Fraser – the business is now honing its M&A strategy.

In February, Frasers saved Studio Retail from administration in a £26.8m deal and at the end of May, it swooped to rescue fashion etailer Missguided for £20m.      

Both deals bring new operational capabilities, skill sets and product nous that not only plug gaps in Frasers’ existing proposition but also enhance its reach in the longer term.    

“With Studio, the main appeal is the flexible payment solutions, which we can potentially develop out to the wider group in the future”

Michael Murray, Frasers

Murray says both businesses are “very new” to the group, but he is excited by the benefits they can bring and the new customers they can help Frasers obtain.  

He says: “Missguided is very focused on the digital-savvy woman consumer and we can learn a thing or two in terms of design, fashion, trends, drops, their social media strategies – all of which can influence our other brands in the future, potentially. But we are at the early stages.

“With Studio, the main appeal is the flexible payment solutions, which we can potentially develop out to the wider group in the future.” 

Studio Pay offers shoppers the option of paying by credit over a number of monthly instalments – a proposition that could come into its own as the cost-of-living crunch deepens in October and into 2023. 

International opportunity

It’s not just in its domestic market that Frasers is seizing acquisition opportunities.

Frasers Group Website Phone

Frasers has been one of the most acquisitive businesses in the UK in recent years 

As part of its trading update to the City this morning, Frasers quietly confirmed the purchase of Danish retailer Sportmaster, which it completed last month. 

Much like Sports Direct, SportMaster is a multi-category, multi-brand retailer of sports and outdoor products. It operates 75 shops across Denmark, employing more than 1,000 people. 

Frasers also revealed plans to develop a 2.4 million sq ft warehouse in Bitburg, Germany, which is due to open “in the coming years”. The site will have the capacity to handle 300 million items every year, supporting Frasers’ growth in continental Europe.

Sales in Frasers’ European retail division jumped 28.4% to £790.2m in the year to April 24, accounting for 16.6% of group revenues. Such moves will grow that figure further in the years ahead, helping to cushion the blow of a turbulent UK market. 

Conversely, Frasers has proved it is not afraid to pull the plug on markets that aren’t driving a big enough return on investment. 

In May, a week before it completed the acquisition of Missguided, Frasers agreed to offload its Bob’s Stores and Eastern Mountain Sports businesses in the US to GoDigital Media Group.

Frasers said proceeds from the $70m (£58.5m) sale would allow it to place an “even greater focus on delivering its elevation strategy by focusing on store experience, digital and product”. 

That overarching strategic focus has established what Frasers describes as “rock-solid foundations”. The challenge now is to build on those amid a perfect storm of additional headwinds brewing in the autumn.  

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