Mike Ashley’s Frasers Group which owns Sports Direct and House of Fraser has warned its finances could take a £100million hit as non-essential shops are forced to stay shut until April 12.
Yesterday Boris Johnson announced the Government’s roadmap out of lockdown, revealing most High Street shops would remain closed until a week after Easter at the earliest.
The retail industry has been one of the hardest hit areas during the pandemic, with the British Retail Consortium warning lockdown has cost non-food stores £22billion.
Figures released by the Office for National Statistics last week show retail sales volumes dived by 8.2% January, as most shops were shut.
Following yesterday’s announcement, Frasers Group, released a statement to the stock exchange, which read: ‘Given the length of this current lockdown, potential systemic changes to consumer behaviour, and the risk of further restrictions in future, we believe this non-cash impairment could be in excess of £100 million.
Sports Direct’s parent company Fraser’s Group has warned it faces a £100million financial hit by delaying the reopening of non-essential shops until April 12
‘Any such impairment would be in addition to impairments included in the half year results announced on 10 December 2020 and is expected to be included, subject to audit, with the company’s results for the financial year ending April 2021.’
Most of Frasers Groups’ shops are classed as non-essential, except for Evans Cycles.
The company said the continued shutdown is likely to hit its accounts, with impairments to freehold properties, other property, plant and equipment and right of use assets.
Back in December Frasers Group issued a rare profit warning, saying it was unlikely that the company would achieve a 20% to 30% boost in profits this year, which had been previously suggested.
Prior to the profit warning, the company revealed that pre-tax profits rose by 17.6% to £106.1 million at Frasers Group, in the half-year to the end of October.
House of Fraser and Game are among some of the biggest names controlled by Frasers Group. The British Retail Consortium estimates that non-essential retailers have lost £22bn as a result of lockdown measures that first started last March
Frasers Group is owned by Mike Ashley. Last year the company warned it would not make the 30% boost to profits that had originally been forecast. Most of the company’s retailers are non-essential
The retailer said it had benefited from the business rates holiday, although revenues fell 7.6% to £1.89 billion due to the six weeks of store closures in the first lockdown. Excluding acquisitions, revenues fell 12.6%.
Mr Ashley’s retail empire is the first to comment publicly on the route out of lockdown and will add pressure to Chancellor Rishi Sunak to offer a new round of funding and support at the Budget next week.
On Monday evening, Helen Dickinson, chief executive of the British Retail Consortium (BRC), said: ‘The cost of lost sales to non-food stores during lockdown is now over £22 billion and counting.
While online retailers and food shops were able to see some increase last month, they could not make up for the huge deficit in sales at non-essential retailers, brought about by Covid-19 lockdown measures
Retail sales dropped by 8% last month, with the British Retail Consortium warning lockdown measures have cost non-food shops £22billion
‘Every day that a shop remains closed increases the chances that it will never open again – costing jobs and damaging local communities.
‘Non-essential shops are ready to reopen and have been investing hundreds of millions on making themselves Covid-secure.
‘Government should remain flexible and allow non-essential retail to reopen as soon as the data suggests it is safe to do so.’
‘We welcome the PM’s call “not to pull the rug out” from under businesses. To this end, the Government must act on three vital issues – rents, rates and grants.
Retail bosses welcomed the April 12 announcement, but urged Chancellor Rishi Sunak to ‘relieve struggling businesses of bills’. Pictured: Regent’s Street, London (stock)
‘To avoid further job losses and permanent job closures, the Chancellor must announce a targeted business rates relief from April and extend the moratorium on debt enforcement, as well as removing state aid caps on Covid business grants.
‘This would relieve struggling businesses of bills they cannot currently pay and allow them to trade their way to recovery.’
Retail analyst Springboard found that footfall across UK retail destinations increased for the fourth week in a row in the week beginning February 7, saying the figures deliver more evidence that shoppers are experiencing ‘lockdown fatigue’.
Footfall rose by 1.5 per cent, following a rise of 6.7 per cent in the week previous, as well as increasing by 3.9 per cent in shopping centres and 6.1 per cent in retail parks.
Graham Soult, retail consultant at CannyInsights, told MailOnline yesterday that customers can expect to see some discounted stock on sale when shops open in April, but that ‘Black Friday-style’ price cuts are not predicted.
Mr Soult said: ‘The constant opening and closing of stores over the past year has played havoc with retailers’ normal calendars – we may well see some stores discounting and clearing stock that would normally have been sold in the first quarter of the year, while others might save that for next year and bring forward their full-price summer ranges.
‘I’m not expecting a Black Friday-style discounting frenzy in April, though. Stores will be banking on shoppers being desperate to get out the house, refresh their dusty wardrobes, and spend some of the cash they haven’t been using on holidays and leisure over the last year.
‘After months of closure, stores will want to maintain their profit margins as much as possible while getting the cash flowing again. Shoppers do always love a bargain, but just as important will be reminding customers of all the steps that have been taken to create a safe, well-organised and comfortable shopping environment.
‘And as brands like Topshop and Debenhams migrate entirely online, those high-street names and local independents that remain have an opportunity to really give customers a great experience instore, and tap into all those senses and emotions that are not so easy to spark via a smartphone.’