High street retail giant Frasers (FRAS.L) said it was working hard to offset soaring wage costs, but had seen “more encouraging” trading after a challenging end to 2024.

The Sports Direct owner reported a 2.8% rise in underlying pre-tax profits to £560.2 million for the year to April 27, despite a 7.4% drop in revenues to £4.9 billion.

Second-half profits jumped 8.3% as it recovered from a tough end to 2024 due to weaker consumer confidence in the run up to, and following, the autumn budget.

Frasers – majority-owned by retail tycoon Mike Ashley – had cut its profit outlook in December after the tougher trading, but it said conditions had since improved.

“Following an especially weak period after last year’s budget, both UK consumer confidence and trading conditions improved into 2025, and recent sales trends have been more encouraging,” the group said.

But shares fell 4% in morning trading on Thursday.

The group said it expects to deliver underlying profits of between £550 million and £600 million in 2025-26 as it looks to cut costs to offset a £50 million hike in costs due to the autumn budget move to hike national insurance contributions (NICs) and increase the minimum wage once again.

Frasers – which also owns brands including House of Fraser, Flannels and Jack Wills and stakes in firms such as Hugo Boss (BOSS.DE) – said it would focus on using artificial intelligence (AI) to drive cost savings.

“We are working hard to mitigate those (costs) by taking more costs out, focusing on potential efficiencies through the use of AI, realising further acquisition synergies and sustaining a robust gross margin,” it said.

Figures show on a reported basis, pre-tax profits fell 24.3% to £379.4 million from £501 million the previous year, hit by currency movements and a drop in the value of its stake in Hugo Boss.

Michael Murray, chief executive of Frasers Group, said: “I’m pleased with our performance this year, despite the headwinds caused by last year’s budget.

“We remain fully committed to our Elevation Strategy, which drove another record year of profitable growth and further delivery of our key priorities.”

Frasers Group ramped up expansion once again over the past year, with new markets and upping stakes in companies such as Hugo Boss (BOSS.DE) and AO World (AO.L).

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