By Michele Maatouk
Date: Tuesday 23 Feb 2021
LONDON (ShareCast) - (Sharecast News) - Mike Ashley's Frasers Group said on Tuesday that it expects to book a non-cash impairment charge in excess of £100m on its assets as its stores remain closed until mid-April.
After the government announced on Monday that non-essential stores will not reopen until 12 April, the company said it "currently anticipates making material accounting impairments to freehold properties, other property, plant & equipment, and IFRS 16 right of use assets".
"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 added.
This would be in addition to impairments included in the half-year results in December and is expected to be included in results for the year ending April 2021.
Laura Hoy, equity analyst at Hargreaves Lansdown, said: "With the country's spirits lifted following the unveiling of the government's plan to exit lockdown, it's easy to forget that not everyone is celebrating. Non-essential retailers like Frasers Group certainly aren't. Instead, 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. Weddings, dinners out with friends and a return to the office for most workers are still a long way off.
"Frasers is concerned about 'systemic changes to consumer behaviour', and rightly so. Social gatherings, and even the typical workday, could look a lot different after more than a year of disruption. 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."