Frasers Group PLC (LSE:FRAS) has reported a “solid” first half and kept its full-year profit targets, helped by stronger margins and rapid growth overseas, even as it warned that shoppers remain under pressure and the retail sector is weighed down by excess stock.
The owner of Sports Direct and Flannels said revenue for the 26 weeks to 26 October 2025 rose 5% to £2.58 billion, driven largely by a 42.8% jump in international retail sales.
Adjusted profit before tax (the group’s preferred measure, which strips out one-off items) dipped 2.8% to £290.9 million as higher impairments and interest costs offset trading gains.
Michael Murray, chief executive, said: “We’ve made a solid start to FY26 even though market conditions are tough, consumer confidence is very subdued and excess inventory continues to weigh on the industry, leading to increased promotional activity.” He added that the group was “reiterating our FY26 APBT guidance of £550 million to £600 million”.
Adjusted profit before tax, or APBT, is a way of looking at profits before tax after removing volatile items such as gains or losses on financial derivatives and some property and investment movements.
On a statutory basis, reported profit before tax from continuing operations almost doubled to £412.1 million, helped by gains linked to derivative positions and disposals.
Margins were a clear bright spot. Group and retail gross margin (the share of each pound of sales left after the direct cost of goods) improved by 1.6 percentage points to 47.3% and 46.2% respectively.
Frasers said this reflected a better product and retail mix in its core UK Sports business and its Premium Lifestyle division, which includes Flannels.
Premium Lifestyle’s profit from trading rose 9.2% to £61.5 million, with “green shoots” in the luxury market as Flannels returned to sales growth.
Retail profit from trading, which reflects the day-to-day performance of the shops, climbed 12.2 % to £411.4 million.
However, this was partly offset at group level by an £82.3 million increase in impairments of tangible and intangible assets and an £11.3 million rise in interest costs.
Impairments are accounting write-downs that recognise when assets such as stores, equipment or acquired brands are no longer worth what they were previously carried at on the balance sheet.
The UK Sports Retail division saw revenue fall 5.8 % to £1.33 billion, and Premium Lifestyle revenue slipped 3.7% to £444.5 million, underlining the softness of the domestic market. International Retail, by contrast, grew strongly to £736.5 million.
Frasers highlighted the completed acquisitions of Holdsport in South Africa and XXL in the Nordics, and the opening of new Sports Direct stores with partners in Malta, Australia and the Middle East, as it builds what it calls a “platform for global growth”.
The group has continued to deepen ties with major brands, reporting stronger relationships with Nike, Adidas and Hugo Boss.
Its holdings in Hugo Boss and Australian retailer Accent Group are now accounted for as associates, adding £19 million to adjusted profit before tax in the half.
Frasers lifted its stake in Hugo Boss to 25.2% and in Accent Group to 19.9% during the period, while also investing in The Webster, a luxury multi-brand retailer in the US.
Property remains a central plank of the strategy. The group sold the non-core Coventry Arena business for £50 million, booking a £33.8 million gain, while buying additional shopping centres and retail parks in the UK, including sites at Greenock and Almondvale.
After the half-year end, it completed the £217.6 million purchase of the Braehead retail park near Glasgow.
Frasers also pointed to progress at Frasers Plus, its in-house credit and payments arm. The business ended the half with 1.1 million active customers, up from 0.4 million a year earlier, with Frasers Plus accounting for 20.0 % of UK online sales, compared with 13.7% in the prior first half. Some £154 million of retail sales were made on credit, unchanged year-on-year, as the group completed the exit of StudioPay.
The balance sheet has grown heavier as the group has expanded. Net assets (the difference between what the company owns and what it owes) rose to £2.39 billion from £1.99 billion at year-end FY25, with net assets per share up to £5.32.
Net debt excluding securitisation increased to £1.03 billion from £847.5 million, reflecting spending on capital projects, acquisitions and strategic investments. In July, Frasers secured a new £3 billion term loan and revolving credit facility, with options to extend the term and increase the facility to £3.5 billion.
A revolving credit facility functions like a large corporate overdraft, allowing the company to draw, repay and redraw funds as needed within an agreed limit.
Frasers said the new £3.1 billion facility in place today replaces earlier £1.65 billion arrangements and underpins its investment plans.
The company was blunt about the cost pressures it faces, noting “significant increases in staff costs” following rises in the National Minimum Wage and employers’ National Insurance in April 2025, and ongoing tensions with the Unite union over pay.
It said it was “working hard to offset the £50 million-plus incremental annual costs from last year’s Budget through disciplined savings, synergies and efficiencies”.
Looking ahead, Frasers described the consumer environment as “challenging”. Trading has improved compared with last year’s Budget-affected period but remains weaker than in FY24, with excess stock across the sector still encouraging discounting.
Even so, the group said its ambitions “remain high” and it continues to expect adjusted profit before tax for the full year in the £550 million to £600 million range, now including expected losses from XXL ASA and the first-time equity accounting of Hugo Boss and Accent Group.