Monday 19 March 2018

N Brown shares tumble after promotional sales hit product margins

The company reported a 3.2% rise in group revenue over the 18 weeks to January 6, compared with a 4.1% increase a year earlier.

N Brown figures
N Brown figures

By Kalyeena Makortoff, Press Association City Reporter

N Brown shares plunged more than 14% as investors worried over the effect that promotional sales were having on the plus-size retailer’s margins.

The company reported a 3.2% rise in group revenue over the 18 weeks to January 6, marking a slowdown from the 4.1% increase logged a year earlier.

Its product division – covering clothing, footwear, accessories and home goods – was the biggest drag, rising just 2.7% versus 5.9% last year, with ladieswear sales up just 0.7%.

The JD Williams, Simply Be and Jacamo owner said it had gained market share as a result of promotional sales, but lowered margin forecasts as a result.

The retailer now expects gross margins from its product division to be between minus 225 basis points to minus 250 basis points, compared with a much shallower range of minus 70 basis points to minus 120 basis points.


Retail analyst Nick Bubb said N Brown’s financial services arm was effectively its saving grace, allowing it to keep full-year profit forecasts unchanged.

“Today’s update from the online fashion business N Brown proclaims that its 2.7% product revenue growth in the 18 weeks to Jan 6th was ‘a good performance in a challenging market’.

“But the market is unlikely to be happy with the news that product gross margin was much worse than expected, at minus 225bps to minus 250bps, due to higher promotional activity (even though the group has managed to hold overall profit guidance thanks to much improved Financial Services gross margins).”

Financial services revenue for the period rose 4.6%.

Chief executive Angela Spindler said: “Financial services continues to perform strongly, driven by the ongoing improvement in the quality of our loan book, which adds resiliency to our group in more challenging macro-economic conditions.

“We are confident in achieving our overall profit expectations. These remain unchanged, although we expect the shape of our results to be different than previously anticipated, as reflected in our revised guidance.”

N Brown shares were the worst performer on the FTSE 250 after falling around 14.2% or 40.4p to around 238.4p.

However, it said “continued tight cost control” helped to lower operating cost forecasts for the full year, having previously expected a rise of between 4.5% and 5%.

The retailer is now on track to see costs rise between 4% and 4.5%.

Simply Be was highlighted as its “standout brand” over the period after revenues jumped  14.5%, while JD Williams and Jacamo saw sales increase just 3% and 4.6%, respectively.

By product category, ladieswear’s mere 0.7% rise in sales was easily beat by menswear, up 4.1%, as well as footwear and accessories up 9.6%.

Revenues from its home and gift segment increased 2.1%.

Press Association

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