N Brown feels the trading pain after lower sales and profit warning

ANALYSIS_ Shares in N Brown Group went down by 5.2 percent to 3.30 pounds in trading this on Thursday morning, after reporting a fall in sales and revenue for the half year to August, 30. The British retailer noted that total revenue for the group went down by 0.6 

 percent to 407.3 million pounds, largely reflecting lower sales in JD Williams and taking the hit of an unseasonably warm September.

In its interim statement for the second quarter, it said that like-for-like sales, excluding newly opened stores, were also down, 0.5 percent. Meanwhile, Profit before taxes came in at 42.7 million pounds, behind the previous year's same period's 44.1 million pounds.

Right after presenting these results, the group has reduced its full year outlook arguing not only the weaker-than-expected September sales but also the toll paid to modernise the business.

Modernisation of business, weak September sales and warm weather, N Brown's foes

“The combined effects of the changes introduced so far, principally during the first half, have had an impact on sales, and also on our profit performance,” said the British retailer in a statement.

At “the heart of its strategy” was moving the business further away from the mail order and towards being a multi-channel, fashion-led company. Key initiatives included recruiting more customers, building loyalty among existing customers, and creating a more modern infrastructure.

It said the changes it implemented had “affected both short-term revenue and profit performance as we take the necessary steps to move further away from a traditional mail order business model”.

On a positive note and despite the poor performance, chief executive Angela Spindler said the company was going in the right direction. "We have stepped up the pace of change in the business designed to unlock the potential value we see in a proposition built around fashion that fits,” she said.

“Despite the negative effects of recent market conditions on performance, I am confident that we are taking the right actions and are making good progress."

The stock dropped 10 percent Thursday after it reduced its full-year profit guidance, becoming the worst-performing stock on the FTSE 250 Thursday morning.

In this regard, analysts following the stock pointed out that they were surprised by the warning as just three weeks ago N Brown’s chief executive, Angela Spindler, had said the company was on track, to meet its profits hopes. “While we believe management’s strategy is right for the businesses long term, arguably management has been too ambitious in its change programme. Anticipated customer response and execution has been poor,” said Kate Calvert, an analyst at Investec.

Besides, Jonathan Pritchard, at Oriel Securities, said N Brown’s poor trading could also be down to management trying to do too much too quickly, reported the ‘Guardian’.

“If the poor September sales number was simply to do with the weather, then surely there is pent-up demand, now that the brands are, according to the company, resonating so well with customers?” wondered Pritchard.

Angela González Rodríguez