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N Brown reports 4.2 percent revenue rise in H1

Business |REPORT

N Brown reports 4.2 percent revenue rise in H1

By Prachi Singh

14 Oct 2015

N Brown Group revenue for the half year to August 29, 2015 increased 4.2 percent to 415.8 million pounds (635.4 million dollars). Product revenue increased 6.1 percent. While operating profit excluding exceptional items declined 14.2 percent, underlying trading profit before tax decreased 15.9 percent year-on-year.

Commenting on the financial development in the first half of this fiscal, Angela Spindler, Chief Executive, said, “We have continued to execute significant changes in H1 and have delivered results in line with our expectations. We are adjusting our retail business model and the way we operate, transforming from direct mail-led to digital first. This has been driven by a clear understanding of what customers want, and fuelled by technology.”

Financial highlights of H1

Adjusted earnings per share from continuing operations stood at 5.74p against 11.56p in the first half of FY15 and statutory earnings per share from continuing operations 5.53p against 11.88p, same period last year. However, the company’s board announced half year dividend of 5.67p.

In H1 JD Williams product revenue was 103.1 million pounds (157.6 million dollars), flat year-on-year, with Q2 product revenue slightly up. Simply Be product revenue was up 21.4 percent, with an improving trend in Q2 versus Q1. The online penetration of Simply Be is now 89 percent. Jacamo product revenue was also up 21.4 percent, again with an improving trend Q2 versus Q1.

Thrust on digital retail model for growth

The company is changing its business model from traditional, mail order led to digital. “We continue to see strong metrics online, with demand up 17 percent and active customer numbers up 15 percent year-on-year. Q2 online demand was up 18 percent. Online penetration, that is the proportion of sales which were generated online, stood at 63 percent in H1, a significant increase from the 58 percent in H1 last year. Mobile devices now account for 64 percent of our online traffic, an increase of 12pts, driven by continued improvements in our mobile offering,” said Spindler.

New customers were up 21 percent in the first half. The online penetration of first orders increased by 21ppts to 74 percent and overall online penetration of JD Williams was over 50 percent for the first time, up 8 ppts year-on-year. Market share of retail online traffic as measured by Hitwise, relatively small at 0.4 percent, was up 22 percent. In order to drive customer loyalty, the company introduced an online VIP scheme in H1.

“We expect these annual benefits to start to ramp up from H2 FY16/17 onwards, with the full impact from FY19/20,” said Splindler, adding, “Global multi-channel transformation involves a new core website transaction engine, fixing legacy issues which significantly slowed our speed to market. H2 will see the first go-live releases of Fit 4 the Future. PowerCurve (Credit transformation), which gives us enhanced data for lending decisions, went live a few weeks ago, and our Simply Be euro website (part of global multi-channel transformation) goes live later on in H2.”

International markets and store sales in positive

Revenue in the USA increased 35 percent and 24 percent in constant currency terms. Operating loss reduced from 1.7million pounds (2.5 million dollars) in H1 last year to 0.9million pounds (1.3 million dollars). Until the launch of a new international web platform in mid-2016, the company will remain in cautious expansion mode in the USA. Ireland too reported positive revenue growth in constant currency terms for the first time in several years. Revenues were down 3.9 percent in sterling terms, but up 5.9 percent on a constant currency basis.

Sales from Simply Be and Jacamo stores were up 91 percent or 6 percent on a LFL basis. The operating loss was 0.9 million pounds (1.3 million dollars) versus 0.6 million pounds (0.9 million dollars) last year. The profitability of LFL stores increased by 12 percent. The company currently operates 15 stores, and plans to have 25 stores in total. In late August, it closed 18 clearance stores.

Financial outlook

With transformation from direct mail-led to digital-first on track and delivering tangible results, the company feels that this year will be significantly H2 weighted. “H2 has started well, with a pleasing performance in September, in line with our expectations. Our new Autumn/Winter campaigns have been well received, and we look to the rest of the season with confidence,” concludes Spindler.