Frasers Group, which includes Sports Direct, House of Fraser and Flannels, has doubled the hit it expects to take from the coronavirus pandemic to £200m in the expectation that a third wave will lead to more restrictions on retailers.
The retail chain, controlled by the Sports Direct founder, Mike Ashley, had estimated in February that the impact of the Covid-19 crisis would lead to a £100m non-cash writedown in the value of its properties and other assets.
On Friday, the company said that warnings from the UK government, and its advisers, about a potential “third wave” and a return to normality being “some way off” had promoted it to double the assessment of the impact of the pandemic.
“Further restrictions are in our view almost certain,” it said. “We also note the Covid-19 affected experiences, estimates, and judgments from other leading retailers. Consequently, Frasers Group currently anticipates making material accounting non-cash impairments … which could be in excess of £200m.”
Only the group’s Evans Cycles bike chain, which is classed as an essential retailer, has been able to trade throughout the high street lockdowns, while the sportswear retailer Sports Direct, the fast-growing designer fashion concept Flannels and the struggling House of Fraser department store chain have been affected by government efforts to control the spread of Covid-19.
The rise of online shopping, increased competition on the high street and rising rent and tax have put department stores under pressure.
When Frasers Group announced the writedown in February, analysts said most of the hit was likely to be linked to House of Fraser but that the group’s Sports Direct stores could also be affected.
At least 14 of House of Fraser’s original 59 stores have closed since the chain was bought out of administration by the group in 2018.
In March, John Lewis Partnership, which runs 42 department stores and the Waitrose supermarket chain, slumped to its first-ever loss after recording £648m of one-off costs relating to the writedown in value of the John Lewis estate, as well as restructuring and redundancy costs from store closures.