N Brown profits as UK and digital focus pay off
It’s good to hear a results report with some positive news in it for a change, especially coming from a company that has had its challenges. N Brown’s half-year report for the period to August 31 on Thursday was subtitled “New strategy drivers digital revenue and profit growth”, so it started off on an upbeat note and its shares rose over 7% in early trading.
With all the positivity, it may seem odd that the company’s revenue was down. But it had a good explanation for this as it worked through its new strategy and focused on profitable sales rather than just revenue at any cost.
Looking at the headline figures, group revenue dropped 5.4% to £432.9m and product revenue was down 9.3% to £282.3m, although excluding the physical stores and its US ops (from both of which it’s withdrawing), the fall was 6.2%.
The group gross margin fell 70bps to 53.5% with product gross margin down 190bps at 51.5% “in a highly promotional market”. So it’s all the more encouraging that financial services revenue rose 2.9% to £150.6m and operating profit was £14.7m, up from a loss of £28.3m a year ago, while pre-tax profit was £18.8m, up from a loss of £27.1m. Adjusted pre-tax profit (with one-offs stripped out) increased 3.9% to £31.8m.
The company also said it saw a 9.5% drop in operating expenses driven by “a more targeted and data-led approach to marketing, removal of physical stores and USA costs and embedding efficiencies across the group.”
So what exactly was responsible for the product revenue fall? The company said it was “a result of the continued managed decline of the legacy offline business, the shift in focus away from [the] USA and the impact of the closure of our store portfolio in the prior year.”
Within all this, Womenswear category revenue was down 3.4% as it continued to scale back unprofitable marketing and offline ops. But in line with its digital growth strategy, Womenswear digital revenue increased 4.6% in the half. JD Williams revenue was down 3.7% but displayed “good growth in digital revenue” at 4%. Simply Be grew revenue by 2% and reported 4% growth in digital. Its performance “continues to reflect our ongoing transition to customer lifetime value modelling in this financial year,” the company said. Ambrose Wilson revenue was down 14.4% but its focus has been on growing its digital revenue like the other brands, and this increased 10.5%. Menswear, which is the Jacamo brand, increased revenue by 5.5% and delivered digital revenue growth of 6.6%.
CEO Steve Johnson said the company announced its new strategy in May to return N Brown to sustainable profit growth “and we have made good progress over the first half of the year.” The new strategy has helped deliver combined digital growth of 5% in Womenswear and Menswear brands in the past six months and the business now has a “clear and actionable market segmentation” and is finalising the strategic direction for its brands.
It includes a focus on maximising the UK “market before leveraging our international opportunity” and this seems to be working, while it’s also investing in driving growth in its core brands.
In the last six months, it launched new campaigns for JD Williams, Simply Be and Jacamo, brought in new specialist fashion agency partners and has “raised production quality”. It also focused its investment on established channels such as TV and press, and newer brand-building channels for it such as outdoor media. In the UK it also completely relaunched its social media strategy with “encouraging” results.
And the company said it has made “good progress in improving [its] branded portfolio to complement [its] own label ranges, offering customers an improved proposition.” In September it launched Sea-Salt, Joules and Hobbs as new brands for JD Williams and this month, it’s launching Tommy Hilfiger and Calvin Klein as new brands for Jacamo. Monsoon, Oasis, Lacoste and Lyle & Scott will also expand their product offer across JD Williams, Simply Be and Jacamo.
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