Frasers Group has revealed that increases to the minimum wage and employer National Insurance added an alleged £10m to its costs last year.

The Sports Direct owner said the changes drove a £9.7m increase in operating expenses across its Premium Lifestyle division, which includes Flannels, House of Fraser, Jack Wills and Sofa.com.

Profit from trading in the division dropped by £9.8m to £147.6m as the additional employment costs outweighed an improved gross profit performance and other cost-saving measures.

Premium Lifestyle sales fell 6.9 per cent to £975.7m, although Frasers said Flannels had returned to growth and pointed to “green shoots” in the luxury market.

Across the wider group, revenue climbed 8.7 per cent to £5.33bn, driven by acquisitions and a 59.2 per cent surge in international sales.

However, adjusted pre-tax profit slipped four per cent to £538m, missing Frasers’ previous forecast of between £550m and £600m.

Reported pre-tax profit rose 38.9 per cent to £527.8m, largely because losses linked to its strategic investments in the previous year were not repeated.

Chief executive Michael Murray said Frasers continued to face difficult trading conditions, weak consumer confidence and excess stock across the retail sector.

“These pressures are weighing on the entire sector, creating a prolonged and challenging environment,” he said.

Frasers has declined to issue profit guidance for its new financial year due to uncertainty surrounding its takeover approaches for Hugo Boss and Australian footwear retailer Accent Group.

It said the potential deals could produce a “variety of outcomes” depending on their timing and level of shareholder support. The retailer will review whether it can provide guidance alongside its half-year results.

Shares in the Mike Ashley-controlled group fell almost six per cent following the update.

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