Frasers Group, the retail giant that owns popular brands like Sports Direct, House of Fraser, and Jack Wills, has recently announced that it will be taking a significant impairment charge against its stores. This decision comes as a result of the economic impact and prolonged lockdowns caused by the ongoing pandemic. It is now speculated that the company may be forced to close more of its stores in the future.
In a recent filing with the stock exchange, Frasers Group revealed that the past year has had a devastating effect on the value of its properties. With the potential reopening of non-essential stores in England on April 12th, the company expects to face additional financial challenges. As a result, it anticipates making substantial accounting impairments to its properties, including freehold properties, other Property, Plant & Equipment, and IFRS 16 Right of Use Assets.
The company acknowledges that the current lockdown measures, along with potential changes in consumer behavior and the risk of future restrictions, could lead to a non-cash impairment of more than £100 million. This would be in addition to impairments already reported in December 2020. The final figures will be included in the company’s results for the financial year ending in April 2021, pending audit.
The mention of “systemic changes to consumer behavior” is particularly significant for Frasers Group as it prepares to reopen its stores in April. The company is aware of the uncertainty surrounding consumers’ willingness to return to physical stores, despite some signs of pent-up demand. The shift towards remote work, which has become a permanent aspect of many people’s lives, could also negatively impact sales at House of Fraser in the long run.
While the company expects a boost in sales of formal and occasionwear during the summer due to the resumption of social events and weddings, the ongoing uncertainty surrounding consumer behavior remains a concern. Frasers Group will need to adapt to changing shopping habits and find innovative ways to attract customers back to its stores in order to thrive in the evolving retail landscape.
Useful links:
– BBC News: Frasers Group reveals impairment charge on stores
– The Guardian: Frasers Group warns of £100m hit to assets as Covid wrecks high street
