Sports Direct owner Frasers warns of £100m Covid writedown

Frasers Group, the retailer controlled by Sports Direct founder, Mike Ashley, expects to take a hit of more than £100m after the government said non-essential retailers in England would have to wait until 12 April at the earliest to reopen.

The group, which includes Sports Direct, House of Fraser and Flannels, said the sum reflected expected writedowns of the value of its properties and other assets.

“Given the length of this current lockdown, potential systemic changes to consumer behaviour and the risk of further restrictions in future, we believe this non-cash impairment could be in excess of £100m,” the company said.

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 sportswear retailer Sports Direct, fast-growing designer fashion concept Flannels and struggling House of Fraser department store chain have been affected by government efforts to control the spread of Covid-19.

Independent retail analyst Nick Bubb said the majority of Frasers’ writedown was likely to be linked to House of Fraser but the group’s Sports Direct stores could also be affected.

The rise of online shopping, increased competition on the high street and rising rent and tax have put department stores under pressure. Debenhams is about to permanently shut all its 124 remaining outlets, Beales closed all its stores after falling into administration, and John Lewis closed eight stores last year with up to eight more under threat.

At least 14 of House of Fraser’s original 59 stores have closed since the department store chain was bought out of administration by the group in 2018 including Frasers on Princes Street in Edinburgh and stores in Exeter, Shrewsbury and Cirencester. It will move out of Edinburgh’s landmark Jenners store on Princes Street after 183 years in May and further stores are expected to close permanently this year.

Laura Hoy, an equity analyst at Hargreaves Lansdown, said: “With the country’s spirits lifted following the unveiling of the government’s plan to exit lockdown, it’s easy to forget that not everyone is celebrating. Non-essential retailers like Frasers Group certainly aren’t.

“Frasers is concerned about ‘systemic changes to consumer behaviour’, and rightly so. Social gatherings, and even the typical workday, could look a lot different after more than a year of disruption – not to mention consumers’ increased preference for e-commerce over high-street shops.

“Frasers isn’t facing a cash crunch for the time being, but it will struggle to do much more than stay afloat in the near term. Frasers’ warning is likely a signpost for the sector as a whole: more pain ahead.”