Frasers Group’s shares plunged by 10% this week after it “sounded the alarm” on profits, says Laura Onita in The Daily Telegraph. The news followed store closures in London and swathes of the South East due to the new Tier 4 rules .
The retailer, which owns chains including Sports Direct, House of Fraser, Evans Cycles and Game Digital, said its previous guidance from earlier this month of a 20%-30% rise in annual profits was “unlikely to be achieved”. The new rules mean that many shops will be forced to close to customers yet again and there is a “high likelihood” of “further rolling lockdowns” over the next few months.
The new restrictions closing all non-essential retailers will hit Frasers particularly hard since it is “heavily reliant” on “bricks and mortar” high-street sales, unlike online-only rivals, says Jim Armitage in the Evening Standard. The disruption may also have a knock-on effect on its plans to buy parts of the Debenhams and Arcadia businesses now up for sale. While it could make the brands “even cheaper”, Frasers’s problems mean that its “financial firepower” could be reduced. Already it looks as though Arcadia will be sold off “piecemeal”, with Australia’s City Chic agreeing to buy Evans clothing.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Clothing sales plunge
Of course, Frasers Group isn’t the only retailer to be affected by the change in plans, says the Financial Times. The share prices of Next, Ted Baker and Superdry have all been hit. The new restrictions are particularly painful since they come during the peak trading period in the run-up to Christmas.
The November lockdown has already caused a lot of damage, with clothing sales falling by nearly a fifth compared with the previous month, says Phillip Inman in The Guardian. Sales of household goods rose by 1.6% and many online operators reported booming sales, with internet-shopping now accounting for 31.4% of all spending, “an increase of almost 75% since November 2019”. But this was partly due to “heavy discounting”. Overall retail sales fell by 3.8% month-on-month.
Even if retailers can keep selling during Tier 4, they are increasingly relying on consumer credit, says Graham Ruddick in The Times. While credit allows shoppers to spread the cost of items in a “manageable way”, there has been “dramatic growth” of such schemes, either directly or through financial technology companies such as Klarna. More than 70% of Next’s sales in the first six months of the year were made on credit. With the FCA, the City regulator, due to report on unsecured credit next year, companies could be forced to change the way such schemes are run.
-
Where are ISA savers and investors putting their money?With less than three months until the end of the tax year, where are ISA savers and investors putting their money? We look at the latest ISA trends.
-
More than £53 billion held in fixed-rate cash ISAs will mature by April - where should savers move their money?If your fixed-rate cash ISA is maturing soon, we look at the options available to you
-
What investors can expect from stocks and the economy in 2025There are reasons for investors to be hopeful about 2025, with slowing interest rates and moderating oil prices. But trouble may be brewing in bond markets
-
Why Wise could be worth a lot more than its share price impliesForeign-exchange transfer service Wise has the potential to become the Amazon of its sector – here's why you should consider buying this stock now
-
Can The Gym Group pump up your portfolio?Gym Group was one of the best UK small-cap stocks in 2024 and will beef up your profits this New Year
-
MoneyWeek's five predictions for investors in 2025MoneyWeek's City columnist gazes into his crystal ball and sees five unexpected events in store for investors in 2025
-
How buy-and-build stocks deliver strong returnsBunzl, DCC and Diploma became successful through buy-and-build – rolling up dozens of unglamorous businesses. How does it work and what makes it successful?
-
Singapore Technologies Engineering shows strong growthSingapore Technologies Engineering offers diversification, improving profitability and income
-
South Korean won hits 15-year low – what it means for 'Korea discount'After Yoon Suk Yeol's failure to declare martial law, South Korean markets are reeling, with the weakest won since 2009. Will this worsen the Korea discount?
-
Why undersea cables are under threat – and how to protect themUndersea cables power the internet and are vital to modern economies. They are now vulnerable
