Electronic tax

Frasers profits soar, but store tax reform remains a bone of contention – Sourcing Journal

The CEO of the new Frasers Group, Michael Murray, has responded to a call for the UK government to review costly commercial tariffs which impose on shops the right to occupy commercial property and usually amount to 50% of the annual rent of the location.

In a word: Frasers highlighted new stores, its Hugo Boss investment and a handful of acquisitions as some of the highlights of the year ended April 24. The takeover of Missguided, Studio Retail (SRL) and Danish sports retailer SportMaster will help the fashion company “unlock new e-commerce capabilities and access a wider customer base,” he added.

“Clearly our elevation strategy is working and we are building incredible momentum with new store openings, digital capabilities and deeper brand partnerships across all of our divisions,” Murray said.

Murray, who took over as CEO from future father-in-law Mike Ashley in April, reiterated the call for corporate rate reform.

“We have consistently criticized the archaic corporate pricing regime and the need for reform,” Murray said, adding that Frasers faces “skyrocketing construction and store fit-out costs, which creates an extremely challenging environment to open and operate physical stores.”

He believes “consumers will continue to flock to stores for great brands and experiences.” Compounding the challenges of inflation and supply chain disruption, retail is “also battling a fundamentally flawed corporate pricing system that has yet to be resolved,” Murray said.

After the British Retail Consortium pushed for a rate cut in October, former Chancellor and Finance Minister Rishi Sunak implemented a 50% cut valid for one year. In May he pledged to cut business taxes but resigned earlier this month and found himself in a run-off with Liz Truss to be the next leader of the Conservative Party after the Prime Minister resigned British Boris Johnson amid scandal.

“If I become prime minister, I will put in place the sweeping package of reforms needed to unleash growth,” Sunak tweeted Thursday.

In August last year, Frasers chairman David Daly said the system of excessive and outdated tariffs for businesses could force House of Fraser to close some sites unless tax reform.

“We will continue to invest in the high street alongside our online and digital capabilities,” Daly said Thursday, adding that the company continues to see acquisition opportunities. Daly noted that in the second half of the financial year just ended, the Frasers Group completed the purchase of land in Bitburg, Germany, where it plans to build a distribution center serving stores and dot-coms for continental Europe.

Net sales: For the year, revenue jumped 31% to $4.75 billion ($5.66 billion) from $3.63 billion ($4.32 billion). Excluding acquisitions and on a currency-neutral basis, revenue grew 31.2%, Frasers said.

The results do not include SRL, which was acquired during the year. Bob’s Stores and Eastern Mountain Sports are a discontinued operation.

By division, UK Sports Retail revenue rose 31.2% to 2.58 billion pounds ($3.08 billion), helped by the strong reopening of stores following the Covid-19 lockdown. Premium lifestyle revenue increased 43.6% to £1.06 billion ($1.26 billion), primarily due to new Flannels stores, continued online growth and the reopening of stores. stores after closing. Retail turnover in Europe rose 28.4% to 790.2 million pounds ($942.3 million), largely thanks to strong growth in Ireland and the restart of stores after a pandemic break. Rest of World Retail Group revenue fell 1.6% to 150.3 million pounds ($179.2 million), while the wholesale and licensing business saw revenue rise 9 percent, 7% to 168.1 million pounds ($200.5 million).

Earnings: Profit for the year after tax blacked out to 297.3 million pounds ($354.5 million) from a loss of 78 million pounds ($93.0 million) a year ago. Profit before tax was 366.1 million pounds ($436.6 million) compared to profit of 8.5 million pounds ($10.1 million) the previous year.

Despite economic headwinds that include inflationary pressures, the company said the current momentum gives it “confidence to deliver adjusted pre-tax profit of between £450 million ($536.6 million) and £500 million.” pounds ($596.2 million) for the next fiscal year.

Murray said the “conservative” guidance reflects continued supply chain disruptions.

Opinion of the CEO: “We have the right strategy, the team and the determination to continue driving our business forward,” Murray said.