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Sports Direct owner expects to take £100m hit from continued lockdown rules
23 February 2021, 08:24
Mike Ashley’s Frasers Group said the planned reopening of non-essential retail on April 12 will have a material impact on the retailer’s accounts.
Sports Direct owner Frasers Group has said it could take a hit in excess of £100 million due to the Covid-19 restrictions on non-essential retailers reopening stores lasting until April 12.
Prime Minister Boris Johnson announced his road map to reopening the economy on Monday, including plans that stores – including Mike Ashley’s portfolio of House of Fraser, Sports Direct and Game Digital – could welcome back customers by the spring.
But 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.
In a statement to the stock exchange, the company said: “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.
“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.”
Back in December the company issued a rare profit warning, saying previously published guidance of a 20% to 30% boost in profits this year is unlikely to be achieved.
Tier 4 rules introduced at the time forced non-essential retailers to close, followed by a full national lockdown in England.
The majority of Mr Ashley’s retail portfolio fell into the “non-essential” category, although his Evans Cycles business has been allowed to remain open.
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.
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.
“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.”