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Mike Ashley Set to Step Aside as Frasers Profits Plunge 94.1%

Frasers Group CEO Mike Ashley is set to step down from the CEO role in May 2022 and remain as an executive director of the company. But the firm is also pushing for a new business rate system to help keep some House of Fraser doors open.

In a Nutshell: Ashley, best known for his ownership of the Sports Direct business that’s now part of Frasers Group, is slated to be replaced by Michael Murray, currently head of elevation and also engaged to Ashley’s daughter Anna.

“The board of Frasers is now in discussions with regards to transitioning the CEO role from Mike Ashley to Michael Murray over the course of FY22. It is currently proposed that Michael Murray will assume the role of CEO on 1 May 2022,” Frasers Group said in a statement on Thursday. “A reward and remuneration package is now under consideration on the assumption Michael Murray will assume the CEO role. Any reward and remuneration package will be subject to any requisite shareholder approval.”

The statement said the company’s elevation strategy is “transforming the business and receiving positive feedback from consumers and our brand partners, especially on projects such as the new Oxford Street Sports Direct which opened in June 2021.”

News of the C-suite shift came as the company posted a drop in profits sparked by Covid-related store closures. The exception was its Premium Lifestyle group, which saw growth of its online business and new store openings.

“The Group is continuing to invest in its physical and digital elevation strategy and our omni-channel offering is growing in strength,” Ashley said. While stores have reopened above expectations, there’s still cause for concern. For now, “management remains of the view that there is a high risk of future Covid-19 pandemic restrictions, likely to be over this Winter and maybe beyond,” he added.

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David Daly, chairman of Frasers Group, said that the pandemic continues to be a challenge for the country and the company, with stores closed again in November 2020 followed by a third lockdown in January 2021. “Our European stores were also impacted by closures although the impact was not as punitive as it was for the UK business,” Daly said in a statement.

The company is considering taking on a number for former Debenhams stores in the U.K., but that would likely only happen if the government provided a “new and appropriate policy on business rates,” Daly said, calling the current rates “excessive” and stating that an outdated business rates system could even possibly jeopardize some House of Fraser locations.

Daly said Frasers will “continue to invest across the portfolio of our retail fascias, always pushing the boundaries and thinking without limits. Our investment in our digital capability, including on platforms and people, will continue as will investment in automation in our warehouse to support our bricks and clicks fulfillment capabilities.”

Daly added that Frasers is “fully supported by our third-party brands as elevation is complimenting their own strategies.”

The company during the year acquired DW Sports and Fitness, and increased its investments in Hugo Boss and Mulberry.

Frasers Groups portfolio includes Evans Cycles, House of Fraser, Sports Direct and Flannels, among other businesses.

Net Sales: Group revenue declined 8.4 percent to 3.62 billion pounds ($5.05 billion) from 3.96 billion pounds ($5.51 billion). On a currency neutral basis and excluding acquisitions, revenue fell by 11.4 percent for the year.

By category, the U.K. sports retail group saw revenue fall 10.7 percent to 1.97 billion pounds ($2.74 billion) from 2.20 billion pounds ($3.07 billion) a year ago. Its premium lifestyle group, which includes House of Fraser, posted a 1.9 percent increase to 735.6 million pounds ($1.02 billion) from 722.0 million pounds ($1.01 billion). European retail fell 11.8 percent to 615.2 million pounds ($857.1 million) from 697.7 million pounds ($972.1 million). The Group’s Rest of World Retail group—which includes its Bob’s Stores and Eastern Mountain Sports in the U.S.—saw revenue fall 12.3 percent to 152.7 million pounds ($212.8 million) from 174.2 million pounds ($242.7 million). Wholesale and licensing revenue fell 4.3 percent to 153.3 million pounds ($213.6 million) from 160.2 million pounds ($223.2 million).

Earnings: For the year ended April 25, 2021, profit before tax for the group fell 94.1 percent to 8.5 million pounds ($11.8 million) from 143.5 million pounds ($199.9 million) a year ago.

On an after-tax basis, the company reported a loss that fell 177.2 percent to 78.0 million pounds ($108.7 million), or 0.17 pounds ($0.24), on profits of 101.0 million pounds ($140.7 million), or 0.16 pounds ($0.22), a year ago.

The company said that because of uncertainties connected with the pandemic, it would not be giving a projection for Fiscal Year 2022 performance.

CEO’s Take: “The board of Frasers Group has continued to consider the probable return of restrictions during FY22, including within its accounting judgements and estimates for FY21. As the effects of the Covid-19 pandemic continue to cause future uncertainty, including the Delta variant surge we are currently seeing, the board of Frasers Group considers it cannot currently confirm with enough material accuracy what the outcome for FY22 will look like,” Ashley said.