Break in the clouds for Frasers Group sees Mike Ashley stepping down as CEO
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown
‘’A little more confidence has been infused into Frasers Group with the latest sales figures a boost after the long days of lockdown, but the company sees continued uncertainty ahead for retail with new variants causing concern.
Although the damaging effect of the crisis is plain to see, with full year pre-tax profit falling 94.1% to £8.5 million, since stores re-opened sales have rebounded beyond expectations.
It’s no surprise that founder Mike Ashley is taking this break in the clouds to step away from the day-to-day running of the business as CEO and become an executive director instead. The group confirmed that the board is in discussions to allow Ashley’s prospective son-in-law, Michael Murray, to slide into the CEO job in 2022 . That has raised plenty of eyebrows, given the fact that the former night club promotor has only been in the business for 5 years, but as head of elevation he appears to have been a major force behind the group’s ongoing makeover. Mike Ashley built his retail empire from a market stall in Maidenhead, and clearly has the confidence in Murray’s skills, knack and drive to push forward the metamorphosis of the business.
The group wants to kick the cheap image it had acquired through the dominance of value retailer Sports Direct into touch. Now, with department stores House of Fraser and Flannels edging to front and centre of the group – and investment into Burberry and Hugo Boss, the strategic play upmarket continues.
However, there is still a deep reluctance to give guidance for future performance, with worries about the direction of the economy, given the spread of new variants. The caution may also be partly due to the most recent ONS retail sales data which showed that sales volumes in June fell by 3.6% in department stores and 4.7% for clothing volumes overall. If that trend continues it could put the group in a tighter spot, in the months to come.
However, Frasers Group has managed to hang onto shoppers who shifted to filling up virtual baskets instead, with online channels continuing to perform above 2019 levels.
Sports retail revenue has been resilient, declining by just 10% over the year, despite closures of stores for months at a time. Digital purchases and the pent-up demand unleashed as the shops reopened has clearly been a big boost to sales. It seems that the trend for athleisure style isn’t being substituted and the build up to the Euros is likely to have helped, with plenty of young shoppers inspired to buy kit to emulate their sporting heroes.
There are also signs the company is successfully rubbing away the tarnish of questionable working conditions with praise not censure from an employment tribunal for its decision to send workers over 60 home in the early stages of the pandemic. Other high street names like John Lewis and Pret a Manger are instead in the spotlight today for past minimum wage breaches. The company’s statement today also focuses on the benefits of having a workers’ representative on the board, which underlines a determination to draw a line under past criticism.’’