N Brown struggles in UK and US, plans to exit physical stores
When a trading statement starts with the words “a satisfactory performance in a challenging period,” you know it's not going to be spectacularly good.
And so it was with N Brown on Thursday as the retailer that specialises in large sizes and fashion for more mature customers updated on its Q1 performance.
And the company also announced it's "considering" making a complete exit from physical store retailing, which is no surprise given that it had already been closing stores and that its remaining locations accounted for only 2% of its total revenue.
The 13 weeks up to June 2 saw group revenue rising only 0.4% and product revenue actually fell by 2.8%. The group was rescued during the quarter by a 9% uplift in its financial services revenue, that is, the money it earns from selling its products on credit.
However, the good news was that its total online revenue rose 3% and takings from its trio of Power Brands was up 9%.
The group has been gradually moving to a mainly online focus and this is now speeding up with consultation having begun on closing all of its 20 stores. Some 75% of its retail revenue is already generated via web sales, with that figure being 84% when it comes to new customers.
That said, it's not always easy to find new customers and the company said on Thursday that total and Power Brand active customers (on a 12-month rolling basis) were both “broadly flat” year-on-year.
The performance in Q1 was very different from just a year ago. Back then, product revenue was up 10.2% while financial services revenue fell 4.9%.
So what has changed over the past year? The company has overcome specific issues with its financial services arm, but on the product front, it’s facing conditions in the UK fashion sector that are some of the most difficult in its history.
CEO Angela Spindler said that “this was a challenging period for fashion retail. Against this backdrop and a double-digit comparative in product revenue, I am satisfied with our Q1 performance. At this early stage in the financial year our full year expectations are unchanged.”
The start of the consultation progress to close its stores comes on the back of its “online strategy, and continued weak high street footfall,” and adds to the existing closure programme of a smaller number of stores.
“This action has not been taken lightly and we will do all we can to support the colleagues affected during this process,” spindler said, adding that “we continue at pace our journey to become a global online retailer, uniquely delivering fashion that fits. This will underpin our future growth, both in the UK and internationally.”
So how did its individual brands do during Q1? JD Williams, the womenswear brand that targets 40+ customers, saw product revenue falling 2%, while women's plus size specialist Simply Be rose 9.3%, and men’s larger sizes label Jacamo was up 2%. Overall, these three Power Brands rose 2.7%.
But the company’s Secondary Brands and Traditional Segment both fell by more than 9%.
Womenswear was down 4.2% in total, menswear was down 3.2%, footwear and accessories fell 5.4%, and home/gifts dropped 0.8%.
The revenue decline in Secondary brands reflected the planned shift in marketing investment away from Fashion World, towards Power Brands. Traditional revenues declined as it focused on the online element within this segment, and reduced activity in the declining offline segment, as guided to in its full-year results.
Of course, while the company's main focus is the UK, it also has international operations and these didn't perform that well in the latest quarter.
International revenue was down 8%, or 5.2% in constant currency terms.
Revenue from the USA was down 15.9%, and down 7.2% in constant currency. This performance was impacted by its wider strategy to focus on the web rather than stores, but it expects an improvement in the future as activity to support its online operations in the US kicks in.
Revenue from Ireland was flat, or down 3.2% in constant currency terms, again driven by a reduction in offline activity.
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