The Motley Fool

This is why the Frasers Group share price has plummeted 10%!

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.

Businessman looking at a red arrow crashing through the floor
Image source: Getty Images.

The Frasers Group (LSE: FRAS) share price has been extremely topsy-turvy in December trade. The retail giant surged earlier this month on the back of some seriously-strong trading numbers. But it’s done an about-turn in Monday business and wiped out all these gains in a stroke.

Frasers Group is, in fact, down more than 10% in start-of-week business. And it’s within a whisker of plunging to six-week lows below 425p per share. It’s fallen on the back of a fresh trading release which underlines the pressures facing non-essential retail operators like this.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Frasers Group pulls guidance

So what did the firm-formerly-known-as-Sports Direct say today? Well it said the sudden announcement of fresh lockdown measures by the government on Saturday night has forced it to withdraw its guidance for the fiscal year ending April 2021.

The FTSE 250 business commented that “given this is a peak trading period, and combined with the high likelihood of further rolling lockdowns nationwide over the following months at least… [the board] can no longer commit to Frasers Group achieving its publicised guidance.

This is quite a turnaround for Frasers Group investors to swallow. Just last week, the retail colossus upgraded its earnings estimates for the financial year. It predicted then that adjusted EBITDA would jump between 20% and 30% year-on-year. The shuttering of almost all of its stores since the weekend has consigned these bold forecasts to the bonfire.

Coronavirus 2019-nCoV Blood Samples Medical Concept

Tiers and fears

Under Tier 4 rules — restrictions which have been slapped on London and huge swathes of the South-East — retailers selling non-essential goods have had to shut up shop. Frasers Group sells its wares online but its e-commerce operations won’t offset the huge damage that mass store closures will cause.

The Pfizer and BioNTech vaccine is being rolled out quickly across the UK. More than 130,000 Britons received their jabs in the first week alone. However, the fast spread of a super-coronavirus variant has prompted new restrictions and cast fresh concerns over Frasers Group’s profit-making abilities.

Forecasts in danger

Current Tier 4 lockdowns are set to remain in force until December 30. But it’s not unreasonable to suggest they could remain in place for months. Health secretary Matt Hancock told the BBC yesterday that “we don’t know how long these measures are going to be in place. It may be for some time until we can get the vaccine going.”

It’s possible then, that Frasers Group could suffer a severe hangover that extends well into the financial year ending April 2022 too.

Broker forecasts for Frasers Group are set for another sharp revision in the space of just a few weeks. Right now, the retail play is predicted to report a 24% earnings rise in fiscal 2021. This leaves it trading on a forward price-to-earnings (P/E) ratio of 8 times.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.