Profits at Frasers Group (FRAS.L), the company behind Sports Direct, fell 20% last year as the impact of the COVID-19 pandemic offset rising sales.
Billionaire Mike Ashley’s Frasers Group said on Thursday that pre-tax profit in the 12 months to 26 April 2020 fell 19.9% to £143.5m ($187.6m).
The slump in profits came even as sales rose 6.9% to £3.9bn, driven by the acquisition of brands like GAME. Excluding acquisitions and currency changes, revenue fell 12.6%.
Chairman David Daly said it had been “the most challenging year in the history of the company.”
“The political uncertainty around Brexit had been with us for far too long and, just as we were feeling more confident of getting some clarity and stability, the COVID-19 crisis arrived which will continue to have an impact on the economy and our business,” he wrote in the accounts.
The long awaited results, which were delayed by auditing issues, come after Frasers Group withdrew its financial guidance in March, blaming the COVID-19 pandemic. Frasers Group also suspended its share buyback plans at the time.
Like other retailers, Frasers Group was forced to close its stores in March until mid-June due to the pandemic.
Daly said “virtually all” stores were now reopen but said: “The future, at least in the near term, is unclear as we and indeed the world come to terms with living under the threat of COVID-19.”
Frasers Group announced plans to invest £100m in its “digital elevation strategy” and said it hopes to grow underlying earnings by between 10% and 30% in 2021.
Shares in Frasers Group have fallen more than 15% so far this year, reflecting a broader slump in consumer-focused stocks since the COVID-19 pandemic struck.
However, the stock leapt higher on Thursday morning, climbing more than 17%. It follows an 8% rise on Wednesday.
Despite the profit slump, the annual results were better than the City had forecast.
“These are a decent set of results from the high street staple,” said Sophie Lund-Yates, an equity analyst at stockbroker Hargreaves Lansdown.
“Store closures during lockdown inevitably knocked the top line, but the overall picture is better than might have been feared.”
Frasers Group’s main business is Sports Direct, but the company also owns the likes of House of Fraser, GAME, Evans Cycles, and Flannels, as well as stakes in brands like luxury handbag maker Mulberry and Hugo Boss.
Sales at its “premium lifestyle” shops jumped 35% last year, driven by the acquisition of Jack Wills and Sofa.com.
Acquisitions saw the number of stores Frasers Group operates rise from 968 to 1,534. The company employs around 3,000 people.
Earlier this week Frasers Group revealed its chairman had bought shares in the company “in error” despite the company being in a closed period prior to the publication of annual results.
The embarrassing incident extends the company’s reputation for poor corporate governance. Ashely, who founded and majority owns the company, is known for making risky corporate bets and has publicly described himself as a “power drinker”.
The company has faced a parliamentary inquiry over its treatment of workers and Ashley has weathered repeated investor rebellions over his management style.