Investor fears over N Brown promotional sales knock shares
N BROWN shares plunged more than 14 per cent as investors worried over the effect that promotional sales were having on the plus-size retailer’s margins.
The company reported a 3.2 per cent rise in group revenue over the 18 weeks to January 6, marking a slowdown from the 4.1 per cent increase logged a year earlier.
Its product division – covering clothing, footwear, accessories and home goods – was the biggest drag, rising just 2.7 per cent versus 5.9 per cent last year, with ladieswear sales up just 0.7 per cent.
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 per cent product revenue growth in the 18 weeks to January 6 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 per cent.
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 per cent or 40.4p to around 238.4p.
However, it said “continued tight cost control” helped to lower operating cost forecasts for the full year.