The chief executive of the high street retail giant Frasers said that “we felt we’d been kicked in the face” after Rachel Reeves’ autumn budget.
Frasers said it had witnessed weaker confidence among shoppers leading up to and since the budget, as the company reduced its profit forecasts for the year.
The Mike Ashley-founded firm, which owns the Sports Direct chain, revealed a slump in sales for the past half-year and lower profits.
The group said it was on track for adjusted pre-tax profit between £550m and £600m for the current year. It had previously predicted it would be between £575m and £625m.
Frasers also told shareholders that it expected to face an extra £50m in costs due to the October budget, which included increased national insurance contribution payments for firms.
It reported that “consumer confidence has weakened and trading conditions have been tougher” in recent months as it laid out the slightly weaker outlook.
Shares in Frasers plunged 12% to their lowest level since October 2022. The company is being ejected from the FTSE 100 tier of top UK listed companies.
“Like much of retail we felt we’d been kicked in the face,” said Chris Wootton, Frasers’ chief financial officer.
Frasers revealed that operating profits fell by 10.5% to £266.8m for the half-year to 27 October.
The group said it secured almost £75m in cost savings and efficiencies but these were offset by planned reductions in low margin sales at Studio Retail and Game.
Revenues for the six-month period dropped by 8.3% to £2.54bn, compared with the same period a year earlier.
It said this was driven by Game UK and Studio Retail, the companies acquired from JD Sports and SportMaster in Denmark, amid efforts to “right-size” these unprofitable parts of the business. This offset growth across the Sports Direct brand, it added.
The group also reported that revenues in its premium lifestyle business – which includes Frasers and Flannels – dropped by 14.1% for the half-year.
It said this was driven by a shakeup of its portfolio of stores across its House of Frasers business and the brands it snapped up from rival JD Sports in 2022.
This has seen the number of stores across these businesses cut from 66 to 37 over the past year.
Michael Murray, the chief executive of Frasers Group, said: “The first half of this year has been another period of progress for the group, delivering on our objectives as the elevation strategy continues to take the business to the next level.
“Sports Direct UK delivered further sales growth, and our property and financial services divisions are seeing encouraging progress.
“We are set to deliver another year of profitable growth but, given recent weaker consumer confidence leading up to and following the budget, full-year 2025 APBT (adjusted profit before tax) is now expected to be in the range of £550m to £600m.”
Dan Coatsworth, an investment analyst at stockbrokers AJ Bell, said: “When consumers read headlines about companies potentially putting up prices or cutting jobs to offset budget-related cost increases, it’s no wonder that sentiment has weakened. People might be worried about their own job or think the cost of living is going up again, so the natural reaction is to curb spending.
“Life isn’t going to grind to a halt for Frasers but it will have to work harder to shift goods. Even though it is an international business, the largest source of its earnings is the UK.”
