Frasers Group has posted a 2.8% increase in its annual profits but warned of softer earnings in its forthcoming year as it grapples with £50m in extra costs due to changes outlined in last year’s Budget.

The Sports Direct owner delivered an adjusted pre-tax profit of £560.2m in the 52 weeks to 27 April, despite group revenue falling 7.4% to £4.93bn.

It expects to deliver an adjusted profit before tax to fall in the range of £550m and £600m taking into account the “at least £50m of incremental costs as a result of last year’s Budget”.

Frasers plans to offset the headwinds from “potential efficiencies through the use of AI, realising further acquisition synergies, and sustaining a robust gross margin”, it said.

The retail giant said it saved itself £127.2m last year through the planned reductions in low margin sales at its Studio and Game businesses, as well as £224.7m of savings through increased warehouse efficiency.

This helped to offset the 7.2% sales decline in its UK sports arm and 14.8% drop in its premium lifestyle business.

Frasers Group chief executive Michael Murray 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.

“We continued our strategy of confidently investing for the future, unlocking multiple opportunities for sustainable medium- to long-term growth.”

The group accelerated its international expansion in the year, securing new partnerships in Australia, Asia and EMEA.

Murray continued: “We captured over £125m of synergies through strategic acquisition integrations and cost-savings, and continued to invest in real estate opportunities that deliver great value for the group.

“For FY26 so far, we are seeing positive momentum across the group, including strong performance at Sports Direct – and we have big ambitions to continue to raise the bar.

“We are working hard to mitigate the £50m-plus of extra costs caused by last year’s Budget…Looking further forward, we remain confident in our strategy and our plans to deliver multi-year, sustainable profitable growth.”

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