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Investors in high street giant Frasers will hoping for signs that conditions are improving for retailers despite “clouds overhanging” the sector and further cost hikes on the horizon.
The retail group, which owns brands including Sports Direct and House of Fraser, will publish its half-year financial results on Thursday.
Earlier this year, the business said it was working hard to offset soaring wage costs and recovering from a “weak period” after last year’s budget.
The next financial update will come a week after Rachel Reeves delivered her latest autumn Budget statement.
The Chancellor confirmed the national minimum wage will rise again next April, while some businesses are also in line for further cost increases including from business rates and property income tax.
Nevertheless, it will also follow the Black Friday sales – a crucial period for retailers hoping to reel in shoppers looking for deals and lower prices.
Financial analyst Michael Hewson said it is “a well-documented fact that the last 12 months have been challenging for the retail sector, with the 2024 budget adding significantly to the burden” on retailers.
He pointed out that Frasers had flagged it was facing a £50 million hike in costs due to higher national insurance contributions and an increase to the minimum wage, adding “this appears to have shown up in the numbers released in the summer”.
In July, Frasers said it was expecting to deliver underlying profits of between £550 million and £600 million in 2025-26, compared with about £560 million the prior year, as it finds ways to cut costs to offset increased business expenses.
Richard Hunter, head of markets for Interactive Investor, said “it remains to be seen whether the group is still on track” to meet those forecasts.
He said: “Nearer term, the current clouds which are overhanging the retail sector has weighed on performance.
“Consumer sentiment is patchy at best, retail sales are under pressure and the general economic backdrop has lessened consumer propensity to spend.”
“On the face of it, there should be reasons for optimism as the group has highlighted.”
He cited “partnerships with global names such as Nike, Adidas and Hugo Boss” but cautioned “these tie-ups have tended to weigh on Frasers in the past given a difficult luxury backdrop”.
Frasers, whose roster of brands also includes Flannels and Jack Wills, ramped up expansion further over the past year, entering new markets and upping stakes in companies such as Hugo Boss and AO World.
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