Second profit warning in six months makes N Brown stock falter

N Brown, parent group to JD Williams, Figleaves and Jacamo brands, has issued its second profit warning in less than six months. The warning comes just after the online retailer cut prices to revive sales.

“While we are disappointed by the slower than anticipated progress from a profit perspective, this is because we are taking the right decisions now, in some areas earlier than anticipated by our previous profit guidance,” summed up the company’s results Angela Spindler, N Brown’s chief executive.

Spindler also recalled that N Brown had relied too much on income from providing credit for customers and not enough on selling products. Withdrawing credit for sales of big items had cut revenue but reduced the risk of bad debts, further elaborated the CEO at N Brown.

On the upside, Spindler pointed out sales momentum in recent weeks as the group recovered from a slow autumn selling season. Like-for-like sales were 3.6 percent higher in the 13 weeks to February 28 but due to the impact of "tactical and strategic" price investments.

As reported by the ‘Guardian’, the British retail group said earlier this week it expected profit for the year ending this month to be slightly less than the 88 million pounds forecast by City analysts.

For the last quarter of its financial year, N. Brown Group’s sales growth is said to be of 3.6 percent.

N Brown warns FY sales will be flat YoY

However, the company warns that full year sales will now be flat year-on-year, and has revised its profit before tax down, warning it expects to see pre-budget report (PBR) come in slightly lower than the market consensus of 88 million pounds. Net debt is expected to be in the region of around 250 million pounds for the year

It is worth to remember that N Brown had already cut its profit guidance in October but it said in December that the business was on track to meet expectations.

"We have no doubt shareholders will be concerned and frustrated by the profit slippage, however, we believe management is doing the right things to position the business fundamentally better for the future," said trusting the company’s efforts Clive Black, a retail analyst at Shore Capital Stockbrokers.

On the wake of the news, the stock lost 17 percent to a 339 pence close on Wednesday, having dropped by 40 percent in the past year. Shares slumped equally in October, when analysts forecast a surplus as high as 103 million pounds while the retailer cut its own forecast.

“Over the year, N. Brown braced the endemic struggles facing the fashion market in the UK, with an unseasonably mild winter impacting demand for seasonal ranges. Yet the group’s profit performance has also been hindered by its strategic transformation programme – a process that has accelerated as it embarks on the extension of its warehouse and a “first price right price” trial. Although these developments have been widely anticipated, the group conveys that the pace of adjustment has been faster than expected, especially over Q4,” reminds retail consultancy firm Conlumino.

Soon after the update, N Brown Group plc (LON:BWNG) had its price target decreased by Credit Suisse from 330 pence to 325 pence in a research note issued to investors on Thursday. The firm currently has a ‘neutral’ rating on the stock.

N Brown Group plc has a one year low of 282.5000 pence and a one year high of 581.8500 pence while the company’s current market cap is 943.04 million pounds.