Mike Ashley’s Frasers Group has threatened to close stores if landlords will not agree to move to rents based on sales figures, after it said Brexit and the coronavirus pandemic had led to “the most challenging year in the history of the company”. Underlying pre-tax profits for the group, which owns Sports Direct, House of Fraser, Evans Cycles and Flannels, fell by 18% to £117.4m in the year to 26 April. Sales at its core sports business decreased 14.6%, but edged up 0.7% including the contribution from the digital gaming group Game, which is now part of that division. Total group revenues increased from £3.7bn to £3.9bn after a number of acquisitions including Game, Sofa.com and the fashion brand Jack Wills. Sales at Frasers Group’s premium lifestyle division, which includes the fast-growing Flannels designer chain as well as the troubled department store House of Fraser, rose 18.6% as it opened six new Flannels stores and closed five ailing House of Frasers. However, the division made a £33.2m operating loss after a £51.4m loss the year before. Shares in the group rose more than 13% to 347p as analysts said Frasers had weathered the pandemic well, benefiting from higher demand for sportswear, bikes and casual clothing in the shift to working from home. Ashley said his objective for the forthcoming financial period was to move the group’s leasehold estate towards turnover-based rents across all its chains in all territories. Such rents are typically lower than traditional leases, which have set terms agreed over a period of years. “Long-term leases will be signed with collaborative landlords and those willing to co-invest in the elevated store model. However, it is possible further store closures will occur over the coming year where such terms cannot be agreed,” Ashley said. The company flagged that House of Fraser, which operates from 48 outlets compared with 59 when it was bought out of administration by Ashley’s retail group two years ago, could be particularly vulnerable to closures depending on lease negotiations. The chairman, David Daly, said the department store “remains a challenge”. Ashley told analysts that if the government did not take action to reform business rates then many House of Fraser stores would close next year when a tax holiday comes to an end. He called for a meeting with the prime minister to discuss the situation. “If Boris Johnson wants to give me 10 minutes of his time we can save tens of thousands of jobs,” Ashley reportedly told an analysts’ meeting. Alongside likely store closures, the group intends to invest more than £100m in its online business, with a particular focus on Flannels. It said online sales had grown strongly during the high street lockdown, when all its UK stores, and most in other countries, were forced to close temporarily. This online boost as well as a recovery since stores were allowed to reopen last month was enough for the company to say it was confident in delivering a 10% to 30% increase in underlying profits for the year ahead. Flannels continued to be a “key area of development”, with plans to open stores of up to 5,600 sq metres (60,000 sq ft) in order to house beauty, services and food and drink. In a typically long and wide-ranging statement, Frasers also reiterated criticism of Debenhams. The value of Frasers’ shareholding, on which it had spent about £150m, was wiped out when the the department store collapsed into administration in April 2019. Ashley had made no secret of his desire to take control of Debenhams, which dropped back into administration in April this year. Frasers is still thought to be interested in buying about 30 of its stores. Daly said: “It is scandalous that this business has now been in administration twice. To date and to our knowledge, there seems to be a lack of political or regulatory interest in investigating the impact on shareholders in the initial administration, and now in the second administration we expect that further stakeholders will suffer.”