Frasers doubles its expected Covid-19 hit to £200 million
The owner of Sports Direct and House of Fraser has warned that it could take a hit of more than £200 million due to coronavirus restrictions – double its previous estimate in February.
Frasers Group said it believes further restrictions on trading are “almost certain”, believing a writedown against freehold values and other non-cash impairments will be required.
In a stock market update, the group said: “Frasers Group is continuing to assess the Covid-19 potential impact on asset values.
“In our ongoing assessment wenotethecontinuinggovernment and government adviser pronouncements regarding ‘third waves’ and normality being ‘some way off ’, meaning further restrictions are in our view almost certain.
“We also note the Covid19-affected experiences, estimates and judgments from other leading retailers.”
The group is planning to reopen swathes of its estate from this coming Monday, as nonessential retailers south of the Border are allowed to welcome back customers. Scottish
stores are likely to reopen on April 26 in line with Scottish Government guidance.
Frasers Group, controlled by retail entrepreneur Mike Ashley, also includes Game Digital, Jack Wills and Evans Cycles (which remained open as an essential retailer).
Its bosses have been critical of the extension by the Chancellor to the business rates holiday and the restrictions it places on how much can be saved for major operators such as Frasers.
Ashley’s firm has also been eyeing up potential takeover opportunities throughout the pandemic, showing interest in the collapsed Debenhams and Peacocks brands, although administrators have found that Frasers’ offers have tended to be too low to accept.
Susannah Streeter, analyst at Hargreaves Lansdown, sa id: “While other retailers appear to be riding a cheerful wave ahead of the reopening of the high street, Frasers Group appears to be the party pooper, sounding a cautionary note about getting carried away too soon.
“The owner of Sports Direct, House of Fraser and Flannels has doubled the hit it expected to take due to the pandemic with expectations that a third wave of infections could lead to further restrictions on retailers.
“Back in February it reckoned that it would have to deal with a non-cash writedown in the value of its properties and other assets of around £100m but now it has increased its assessment – putting a figure on impairments in excess of £200m.
"It’s taking warnings from the UK government about a return to normality being some way off seriously, expecting further restrictions to be ‘almost certain’.
“It’s the make-up of Frasers Group’s retail portfolio which puts it under particular pressure.
"Although it has a significant online presence, to offset some of the lost sales, it also has a large footprint of stores in high streets which have fallen out of favour with shoppers, compared to retail parks, even when restrictions have eased.”
She added: “While the risks of a potential third wave, caused by new strains of the virus are lingering like dark clouds in the distance, for now, make hay while the sun shines appears to be the sentiment dominating the retail sector.’’