Why has the Frasers Group share price rocketed 13% today?

The Frasers Group share price has exploded again in Thursday business. Here, Royston Wild explains this fresh northwards move.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Investors have witnessed a stunning turnaround in the Frasers Group (LSE: FRAS) share price recently. The UK share — which was known as Sports Direct International until it snapped up House of Fraser a year ago — has steadily recovered ground following the early 2020 stock market crash. A sprint higher in Thursday business means it’s now up by double-digits since the start of the year.

The Frasers Group share price was up 13% at the time of writing, close to 500p too. It’s shot higher on strong half-year results which prompted the retailer to raise its guidance for the full fiscal year.

Frasers Group enjoys profit surge

The Covid-19 pandemic has, of course, delivered a hammerblow to a British retail sector already under huge pressure. Frasers Group has been no stranger to these troubles and revenues dropped 7.4% during the six months to 25 October, to £1.89bn.

Indeed, sales at the group’s core UK Sports Retail division slumped 9.8% during the half year, or 12.4% excluding acquisitions. The lion’s share of turnover here is sourced from the company’s Sports Direct unit and therefore sales slumped due to mass store closures.

Still, investors have sent Fraser Group’s share price soaring on news of exceptional profit growth during that time. Before taxes, the FTSE 250 share saw earnings rocket 17.6% in the half year to October, to £106.1m. Underlying EBITDA, meanwhile, shot 24.9% higher to £226.3m.

Store sales rocket as lockdowns lifted

Frasers Group said that “the strong reopening of stores after lockdown [and] growth in our online business” helped drive profits in the first half. The contribution of its new Flannels designer fashion stores, profits from acquisitions made in the prior fiscal year, and ongoing cost-cutting, also helped push the bottom line higher from the same 2019 period, the UK share said.

As I say, Frasers Group lifted its profits expectations for the full year on the back of that robust first half. The retailer now expects underlying EBITDA to rise between 20% and 30% in the 12 months to April 2021.

This is up from the 10-30% earnings improvement the firm had forecasted back in August.

Reasons to be cheerful

Frasers Group has undoubtedly benefitted significantly from the rise of the athleisure fashion segment in 2020. It’s a sub-sector which analysts reckon will go from strength to strength in the years ahead too.

The retailer’s strong online performance also bodes well for future profits. Incidentally, Frasers Group recently announced a huge £100m investment programme to bolster its digital business and capitalise on the booming e-commerce market to its fullest.

City analysts reckon Frasers Group’s earnings will soar 25% in the current financial year. And they reckon they’ll soar 21% in fiscal 2022 too. Such estimates could receive a shot in the arm following Thursday’s solid results. Today, Frasers Group trades on a forward price-to-earnings growth (PEG) ratio of 0.9.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »