Frasers Group Is The Party Pooper Amid A Cheerful Retail Crowd

Frasers Group Is The Party Pooper Amid A Cheerful Retail Crowd
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While other retailers appear to be riding a cheerful wave ahead of the re-opening of the high street, Frasers Group PLC (LON:FRAS) appears to be the party pooper, sounding a cautionary note about getting carried away too soon.

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Q1 2021 hedge fund letters, conferences and more

A Third Wave Of Infections Could Lead To Further Restrictions

The owner of Sports Direct, House of Fraser and Flannels has doubled the hit it expected to take due to the pandemic with expectations that a third wave of infections could lead to further restrictions on retailers.

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Back in February it reckoned that it would have to deal with a non cash write-down in the value of its properties and other assets of around £100 million but now it has increased its assessment – putting a figure on impairments in excess of £200 million.

It’s taking warnings from the UK government about a return to normality being some way off seriously, expecting further restrictions to be ‘almost certain’.

Frasers Group's Shares Rise 1%

It’s the make up of Frasers Group’s retail portfolio which puts it under particular pressure. Although it has a significant online presence, to offset some of the lost sales, it also has a large footprint of stores in high streets which have fallen out of favour with shoppers, compared to retail parks, even when restrictions have eased.

While Frasers Group sounded the alarm bell, it didn’t manage to dampen investor enthusiasm, with shares rising 1%. On the FTSE 100, JD Sports, Next and Burberry Group were also among the top risers in morning trade, ahead of the easing of restrictions for non-essential retailers on Monday.

While the risks of a potential third wave, caused by new strains of the virus are lingering like dark clouds in the distance, for now, make hay while the sun shines appears to be the sentiment dominating the retail sector.

Article by Susannah Streeter, Senior Investment and Markets Analyst, Hargreaves Lansdown

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