N Brown profits plunge on legacy issues but revenue is strong in UK and US
But on Thursday when N Brown reported its results for the 52 weeks to March 3, the news on the surface looked pretty grim as profits plunged. And what was the big problem? “Legacy issues”. What that means is payouts linked to a “flawed” insurance product that it had backed, as well as expenses from store closures. And the company warned that there will be more pain ahead.
But, of course, it wasn't all bad news and underneath the red ink there was plenty for the company to boast about in what is an undeniably tough marketplace. Investors seemed happy and the firm’s shares rose close to 8% after the results came out.
So let's look at the headline figures first. Statutory pre-tax profit was down nearly 72% to £16.2 million, dented by £56.9 million of exceptional costs with a £40 million payout linked to the insurance product offered by its financial services unit. It stopped selling the product in 2014 but the associated costs will also eat into the current financial year’s cash flow, it said.
Yet with all that excluded, group profits would have risen 1.3%, not a spectacular rise, but certainly a respectable one in current market conditions.
Meanwhile adjusted Ebitda was up 2.3% to £118.6 million. The company said the adjusted Ebitda margin was "broadly flat”, although it actually fell to 12.9% from 13.1%. Operating profit before exceptional items was £90.5m, up 2.5% year-on-year.
There was better news on the revenue front. Group revenue rose 3.9% to reach £922.2 million. And the company’s power brands saw their revenues rising 8%. While JD Williams only rose 3.2%, if the migrated Fifty Plus customers were excluded, it actually rose in double-digits.
The company said the lower response rates from migrated Fifty Plus customers reflected their fashion attitude rather than their channel preference. “They are online shoppers, however, they typically purchase less contemporary fashion items, and the relaunched JD Williams site did not therefore resonate with them as effectively as anticipated,” it said.
Actions have been taken to address this, most importantly through personalising the site for this customer group to ensure that they’re presented with the most appropriate product selection given their preferences. “While it is still very early days, the initial results are encouraging,” the company added.
Simply Be “continued to grow apace” with revenue up 16.3% to £132.8m year-on-year and active customers up over 20% as it maximised sales from the ever-growing plus size market.
It has recently rolled out its Simply Be loyalty scheme, 'Perks', which gives customers personalised rewards in return for engagement and the average number of sessions and demand are both up in double-digits compared to non-members.
Meanwhile menswear brand Jacamo was up 5.1% to reach £68.6 million with active customer numbers up in high single-digits.
As mentioned, there was a good performance across all categories but footwear and accessories stood out, and online sales continue to advance too. They rose 10% overall, although the power brands were strongest with a 17% rise online. N Brown’s online penetration is now 73% and the company said that 76% of all its traffic that comes from mobile devices.
It did well abroad last year too. US revenue was up 10.9% to £17.2 million, or 6.5% currency-neutral, but revenue growth here accelerated through the year, with 21.3% currency-neutral growth in the second half.
Ireland delivered revenues of £17.5m, up 8.9% year on year, or 2.7% currency-neutral.
The company gained market share in UK in both womenswear menswear and widened its appeal both at home and abroad by offering more third-party brands on its websites, many of which are extended to larger sizes on an exclusive basis. It has recently added brands including Monsoon, Quiz, Jack & Jones, Ted Baker, Lyle & Scott, Radley and Superga.
During the second half it also went live on Asos and Zalando, and has recently signed partnership deals with The Iconic (Australia) and Lamoda (Russia). It’s “pleased” with the performance to date.
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What did CEO Angela Spindler have to say about it all? She was cautiously upbeat, hailing the standout performance of Simply Be, but also focusing on how difficult the second half was for the fashion sector.
However she also said that "our strategy continues to deliver results, with market share gains in the UK, USA revenue up, new partnerships under way and almost three-quarters of our revenues now coming online.”
And while she admitted that March was a challenging month for fashion retail, she added that “trade is improving through April, and at this early stage in the new financial year our overall expectations are unchanged.”
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