‘Kicked in the face’: Frasers blames UK budget for profit downgrade

By James Davey

LONDON (Reuters) -Major British retailer Frasers said it felt “kicked in the face” by the government’s tax hiking budget, blaming it for a drop in consumer confidence that forced a cut to annual profit guidance.

Shares in Frasers, formerly called Sports Direct and majority owned by Mike Ashley, plunged 12% on Thursday after the sportswear group joined rival JD Sports Fashion in warning that recent trading conditions have been tougher.

“Both ahead of and after the recent Budget, consumer confidence has weakened,” it said.

On Tuesday, industry data showed lacklustre retail sales for November, with trade body the British Retail Consortium saying low consumer confidence and rising energy bills had dented spending.

A raft of businesses have complained that the government’s move to hike social security contributions and the minimum wage will lead to higher costs, lower investment and weaker economic growth.

Like much of retail we felt we’d been kicked in the face,” Chris Wootton, Frasers’ chief financial officer, told Reuters.

Frasers, whose brands also include House of Fraser, Flannels and Jack Wills, said it was now forecasting 2024/25 adjusted pretax profit of 550-600 million pounds ($699-$763 million) versus previous guidance of 575-625 million pounds and 545 million pounds made in 2023/24.

It made 299.2 million pounds on the same basis in its first half to Oct. 27, down 1.5% year-on-year. Revenue fell 8.3% to 2.54 billion pounds.

Frasers, which trades from over 1,500 UK stores, expects to incur at least 50 million pounds of incremental costs from 2025/26 as a result of the budget.

We are working hard to mitigate these in order to maintain our profitable growth ambitions,” it said.

The group is pursuing what it calls an “elevation strategy” focused on strengthened relationships with brands such as Nike and Adidas, development of its own brand business and investment in flagship stores, automation and online.

In October, Frasers tried and failed to buy Mulberry and is currently in a row with Boohoo over board representation.

Shares in Frasers have fallen 29% so far this year and on Wednesday it was relegated from Britain’s FTSE 100 blue chip index.

($1 = 0.7864 pounds)

(Reporting by James Davey. Editing by Kate Holton and Mark Potter)