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Investing.com -- Frasers Group (LON:FRAS) stock fell 2.7% after the British retail conglomerate issued cautious guidance for fiscal year 2026 despite reporting solid FY25 results within its previously announced range.
The company reported adjusted profit before tax of £560 million for FY25, up from £545 million in FY24 and within the £550-600 million guidance range provided in December. The results reflected a robust second half performance, with trading trends improving following post-Budget weakness in October and November.
Frasers noted strong gross margin progress across the group, with H2 adjusted profit before tax growing 8%. UK Sports trading profit increased 2% to £476 million, with revenue growth in Sports Direct and strong gross margin gains of 180 basis points partially offset by planned declines in Game UK and Studio Retail.
In the Premium Lifestyle segment, despite a 15% revenue decline due to ongoing rationalization of House of Fraser and JD fascias, trading profit grew 15% to £157 million thanks to impressive gross margin improvements of 230 basis points and expense reductions.
International trading profit declined 10% to £114 million due to operating expense inflation but returned to growth in the second half. Financial Services saw a steeper 70% drop to £18 million as expected, with the old Studio Pay credit book being wound down.
The company has significantly accelerated its international expansion in the past six months, forming partnerships to open hundreds of stores across Indonesia, Australia, New Zealand, and regions in Africa and the Middle East, while also acquiring Holdsport in South Africa and the distressed XXL in the Nordics.
Despite reporting "encouraging" recent sales trends and "early signs" of improvement in the UK luxury market, Frasers guided FY26 adjusted profit before tax to £550-600 million, reflecting caution about previously flagged £50 million incremental cost headwinds and macroeconomic challenges.
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