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Oct 6, 2022
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N Brown has weak H1, softer sales continue in Q3

Published
Oct 6, 2022

Online retailer N Brown has reported lower revenue for its half-year to the end of August, with profits also falling as its performance reflected the “normalisation of financial services post Covid-19 and the macroeconomic environment”. But it continued to make “strategic progress” and has a “strong balance sheet”.


Simply Be



Looking at the numbers, group revenue fell 4.6% to £33.5 million with product revenue down 5.2% to £211.2 million. Financial services revenue dropped 3.5% to £120.3 million.

Adjusted EBITDA fell 46.9% to £27.9 million and the adjusted EBITDA margin was down 6.7 percentage points at 8.4%. Adjusted pretax profit plunged 82.4% to £4.3 million and statutory pretax profit fell 74.6% to £7.2 million.

The company said that as the period progressed, “weakening consumer confidence led to a more challenging online retail market”.

But on the plus side, while product revenue fell, the biggest drop came in what it calls its less important heritage brands with an 11.8% fall. Its strategic brands – which are its main focus and include JD Williams, Simply Be and Jacamo – were down only 2.2%.

Still, a decline is a decline and during the period, it got worse. That can be seen from the fact that the overall 5.2% drop in product revenue was only a 0.6% fall in Q1 but a 9.4% plunge in Q2. The company added that the trend has continued in Q3.

That said, a focus on the product gross margin rate (up 1.4 percentage points), “provided mitigation to lower order volumes and continued returns rate normalisation”.

The company said it has taken action to mitigate softer volumes and inflationary pressures “with a focus on promotional discipline and implementing measured price increases supported by data tools”. Average item values are up 14%.

Operational cost flexibility and contract management have also generated savings to offset the normalisation of returns volumes and those inflationary pressures.

And the retailer continued its digital transformation with a new mobile-first website for Simply Be launched in September featuring easier site navigation and smoother checkout journey, It plans to launch a new Jacamo site in the first half of 2023.

WEAK SECOND HALF

With a weak consumer backdrop, it still faces tough times. N Brown said that “uncertainty around macroeconomic conditions persists, and as such, visibility of trading trends is limited. We have seen [the] second-quarter product revenue decline of 9.4% continue into September and at this stage, are planning on the basis of challenging market conditions continuing for longer, with H2 product revenue expected to decline at a similar rate to Q2”.

It expects additional product margin improvements though, via its  “pricing response to cost inflation, the movement of the product mix back to clothing, and ongoing initiatives including data usage to optimise pricing strategies”.

And it added that it’s “well hedged against our US dollar purchases” for H2 and for the next financial year.

The firm has also “yet to see a significant change in the performance of the debtor book as a result of the macroeconomic environment”, despite widespread fears that more customers would default on payments.

CEO Steve Johnson said: “In a difficult period of weakening consumer confidence, we've balanced our objectives between disciplined trading — with a focus on upholding margin — and delivering on our long-term strategy to transform the business.

“Our teams have worked relentlessly to launch Simply Be's new website, and early indicators give us confidence in the wider benefits for all our customers when we roll this out more widely across our other strategic brands.

“We anticipate continued softness in trading over the second half as macroeconomic pressures continue to weigh on consumers, despite government support. We will, therefore, maintain our focus on tightly managing both our costs and margins. At the same time, given our ongoing confidence in our strategy and the strength of our balance sheet, we will continue to invest in our digital transformation to deliver sustainable profitable growth.”

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