British retail group and Sports Direct owner Frasers Group (FRAS.L) said it expects to take a £100m ($141m) hit, after the government announced that non-essential stores in England will not open until at least 12 April. Shares were up roughly 4% on Tuesday morning.
“Given the length of this current lockdown, potential systemic changes to consumer behaviour, and the risk of further restrictions in future, we believe this non-cash impairment could be in excess of £100m,” it explained in a statement.
“Any such impairment would be in addition to impairments included in the half year results announced on 10 December 2020 and is expected to be included, subject to audit, with the company's results for the financial year ending April 2021,” it added.
This comes a day after UK prime minister Boris Johnson announced a phased "roadmap" out of lockdown on Monday, setting out a four-part approach to reopening the country.
"Frasers is concerned about systemic changes to consumer behaviour and rightly so," said Laura Hoy, equity analyst at Hargreaves Lansdown.
"Frasers is hunkering down for at least another seven weeks of store closures... While Frasers’ Sports Direct business has weathered the lockdown relatively well, the group’s other high street names like House of Fraser and Jack Wills have been hurt by a lack of demand for occasion wear and work clothing.
"Not to mention consumers’ increased preference for e-commerce over high-street shops. Frasers isn’t facing a cash crunch for the time-being, but it will struggle to do much more than stay afloat in the near-term. Frasers’ warning is likely a signpost for the sector as a whole: more pain ahead," she added.
In December the company issued a rare profit warning, saying previously published guidance of a 20% to 30% boost in profits this year is unlikely to be achieved.
Tier 4 rules introduced at the time forced non-essential retailers to close, followed by a full national lockdown in England.
The majority of Frasers' retail portfolio fell into the “non-essential” category, although Evans Cycles had been allowed to remain open.
Prior to the profit warning, the company revealed that pre-tax profits rose by 17.6% to £106m, in the half-year to the end of October.
As per Johnson's announcement on Monday, 12 April at the earliest will see the re-opening of 'non-essential' retail, from markets to clothes and homeware stores to betting, vape and phone shops, and outdoor operations for hospitality venues.
Johnson has promised to maintain government support for the economy during the phased exit from lockdown, hinting that current support schemes could be extended.
"We will not pull the rug out," he said in parliament. "For the duration of the pandemic, the government will continue to do whatever it takes to protect jobs and livelihoods across the UK."
The government has spent over £280bn supporting the economy and combating the COVID-19 pandemic. Supported has included almost £70bn in state-backed loans and paying the wages of millions of workers.
The furlough programme is currently due to end in April and the Bounce Back loan scheme, which has proved the most popular state-backed lending programme, closes next month.
"All the key support schemes for business should be extended – through the summer and wherever possible throughout 2021 – to ensure that as many viable firms as possible can make it to the finish line and recover," said Dr Adam Marshall, director general of the British Chamber of Commerce.
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