(Bloomberg) -- Frasers Group Plc has accused the UK’s Labour government of “skulduggery” for raising taxes on businesses, as the retailer cut its profit guidance, sending shares down 15%.
The owner of outlets such as Sports Direct and House of Fraser trimmed its guidance for adjusted pretax profit to as much as £600 million ($762 million) from £625 million.
Frasers, majority owned by tycoon Mike Ashley, also cited a decline at premium German brand Hugo Boss, in which it owns a large stake. Yet most of its frustration was aimed at UK Chancellor of the Exchequer Rachel Reeves, who increased taxes by more than £40 billion in the budget at the end of October.
“The skulduggery around the budget is mind-blowing,” Chief Executive Officer Michael Murray told Bloomberg News in a phone call. “It’s not only just increased cost, but it’s also destroyed consumer confidence.”
Most of the government’s revenue-raising measures came in the form of a higher payroll levy called employers’ national insurance. Frasers said the budget would lift its costs by at least £50 million.
“Retail as a sector has been on its knees for many years and what it didn’t need was to be kicked in the face by Labour’s budget and that’s what’s happened.”
Frasers’ adjusted pretax profit dropped 1.5% in the half-year to Oct. 27 to £299 million. Its share price fall Thursday morning was the steepest since March 2020 when Covid lockdowns were implemented.
Frasers had already lost its place in the FTSE 100 according to a statement Wednesday night.
Acquisitions
“Pricing discipline and efficiency gains limited the decline in underlying pretax profit,” said Derren Nathan, head of equity research at Hargreaves Lansdown. However, a tough trading environment could give Frasers an “opportunity to snap up further brands,” he added.
Hugo Boss is one of many retailers in which Frasers owns a stake. Shares in the German company recently fell to their lowest level since 2021 amid weakness in critical luxury markets such as China and the UK.
Founded by entrepreneur Ashley in the 1980s, Frasers has been run by his son-in-law Murray since 2022. The group is pursuing a growth strategy from acquiring stakes in rival retailers and buying smaller distressed brands, while expanding its premium offerings, despite a downturn in the luxury market.
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