Mike Ashley’s Frasers Group has published its delayed results – the second time in two years sales figures have failed to arrive on time – and painted a bullish picture for the future of the high street at a time when others are fleeing.
Frasers, which includes House of Fraser, Sports Direct and Evans, among others, said the emptying of the high street and shopping centres could prove lucrative for the firm, with more space available to expand.
The company also plans to invest “in excess” of £100 million on upgrading its digital platforms and pushing its designer label business Flannels.
Bosses are keen to push their “elevation” strategy to improve stores and win over more customers with premium products – and away from previous criticisms of crowded stores and neverending discount events.
This includes building strong relationships with Adidas and Nike, who spent much of the past decade shifting away from Mr Ashley and his preferred style of aggressive business.
They also called for the Government to increase corporation tax in the UK by 1% to fund the NHS, adding “on the proviso the full 1% goes directly to the NHS”.
During the lockdown Mr Ashley faced criticism after it was revealed by the PA news agency that he intended to open Sports Direct stores, claiming they were “essential” retailers.
The following day he reversed the decision following criticism from the Government and issued an apology. PA also found Sports Direct hiked prices on at-home gym equipment within hours of the lockdown’s implementation.
Since then, Frasers said in its statement that it has supported front-line services including a sales day with a 50% discount for all NHS staff in June.
The company said: “It was an overwhelming success with gross sales of approximately £50 million before discount and approx. £25 million after discount.”
Chairman David Daly said: “The Covid-19 impact has created uncertainty and we consider that it will be some time before the country and indeed the world recovers.
“However, Frasers Group itself has always taken a long-term approach to its strategy and this has helped us, and will continue to help us, through these unprecedented times. We believe our business is strong as is our balance sheet.
“We will continue with the elevation strategy and the expansion of the new store format supported by our talented and loyal staff and we consider we are well placed for the future.”
Mr Daly did not address the shares he bought and subsequently sold in Frasers during a period where insiders are banned from trading ahead of results. “An error” has previously been cited.
But staff could soon start getting their own free shares, with Frasers announcing plans for a new employee bonus, which has seen Mr Ashley’s firm pay out life-changing amounts to some workers, although he has faced criticism for his preference for zero-hours contracts.
There were no details but shareholders will vote on it at the company’s annual meeting, slated for next month.
The company saw staff turnover increase from 23% a year ago to 28.6%. No reason was given but the company said: “The board considers that this measure is a key indicator of the contentment of our people.”
In its stores, Frasers said it had seen strong growth in its “premium lifestyle” brands, mainly due to buying Jack Wills and Sofa.com during the financial year.
But there was also growth in its UK sports retail division, which includes Sports Direct, Evans Cycles and Game – the latter bought in the past year – and plans are under way to open concept stores that incorporate all three brands.
Bosses said: “It is expected that particularly in shopping centres there will be significant large space opportunities compared to previous years.
“This is likely to result in more leasehold activity with more viable options available.
“Another objective for the coming financial period is the transition of the leasehold estate towards turnover based rents across all fascias and territories.
“Long-term leases will be signed with collaborative landlords and those willing to co-invest in the elevated store model. However, it is possible further store closures will occur over the coming year where such terms cannot be agreed.”
Mr Ashley has had a difficult relationship with some landlords over the past two decades, with many accusing him of using bullying tactics in the past.
As of April 26 it had 769 UK sports retail stores and 179 premium lifestyle sites.
However, finance chief Chris Wootton appeared to contradict the plans for expansion, telling the Evening Standard that “the high street is in ruins” and will not recover without business rates reforms.
Frasers Group is expected to save £91.2 million in England and Wales as a result of the Government’s decision to scrap business rates for retailers in the current financial year, according to real estate adviser Altus Group.
Business rates and high rents have been particularly troublesome for the firm’s House of Fraser department store chain, with Mr Ashley saying previously on reflection he probably would not have bought it.
There were no new details on how the brand will become profitable, but Frasers said: “There are anticipated to be further closures over the coming period, the number of which will depend on the outcome of lease negotiation.”
Revenues for the year to April 26 were up 6.9% to £3.96 billion, but pre-tax profits were down 12.9% to £101 million.
Mr Ashley has traditionally used the company results to make scathing attacks on anyone he perceives as a threat, often writing long, rambling statements about how his company has been mistreated by critics.
In Thursday’s results, however, the bombastic tycoon and Newcastle United FC owner published a more measured statement, although he was keen to point out that a legal wrangling with a Jack Wills landlord had been resolved.