N Brown sees progress as womenswear, m-comerce boom, US remains tough
Specialist fit retailer N Brown seemed cheerful on Thursday as it reported market share gains and “continued positive trading” in the first half. But while the 26 weeks to September 2 showed good progress, it wasn’t a total triumph with some negative figures in among the positive ones.
It was upbeat for the future though, especially as it announced new partnerships to sell capsule collections online with Amazon Fashion for Simply Be and Jacamo, with Namshi for Simply Be and with Debenhams for Jacamo.
And it said the US is a big focus for its future activity with extra marketing spend designed to help it grow there (more of that later).
But what about this H1 results? Product revenue rose 7.5% to £325.5 million during the half, while financial service revenue was up 1.1% to £129.9 million, with group revenue up 5.6% to £453.4 million.
That’s all good news but here comes the weaker bit. Adjusted trading profit before tax was £32.2m, up only 1.8% year-on-year, despite the stronger sales figures. The statutory loss for the half year was £27.6m, although this relates to previously announced exceptional costs of £54.9m and legacy issues. And net debt was up almost 7% to £305.7 million.
So what went right and wrong during the period? N Brown said Its Power Brands saw revenues up 14.3% and active customers up 7.5% excluding Fifty Plus, or 5.9% with it included. JD Williams brand revenue rose 12.1% while Fifty Plus fell 5.2% with the company saying that this brand’s migration into the more successful JD Williams is now complete. Its Simply Be plus-size label soared 21% and menswear brand Jacamo was up 6.7%.
But the product gross margin was 54%, down 190bps year-on-year, as expected, due to the headwind from exchange rate differences affecting the cost of goods sold, which is clearly where some of the difference between strong rising sales but weaker profits came in.
Overall womenswear revenue rose 9.5% with a 90bps increase in market share for size 16+, and it saw continued good progress with brand and retail partnerships. Further new third-party brands were added including Levi's, Mango, Oasis, Tommy Hilfiger and Ugg.
Its online revenue was up 14% overall while the online revenue of Power Brands rose 21% with online penetration 4ppts higher at 72%. Some 76% of all traffic came from mobile devices and within this, smartphone sessions increased by 54% and now account for over half of all traffic. The increase in smartphone usage continued to cause its overall conversion rate to decline to 5.3% compared to 5.7% last year. But it said this remains “encouragingly above the industry average. The conversion rate for smartphones specifically exceeded 4% for the first time.”
The company also said it’s pleased with the performance of its first shopping app for Simply Be. To date, it has an average five-star rating and its conversion rate is ahead of expectations. No surprise that it said it “will continue to improve our app offering in the year ahead.”
STORES AND US EXPANSION
But while online is its biggest business, it does still have stores. Overall, revenue from the store estate was £10.6 million in H1, down from £11.5 million a year ago. At the end of the first half it had 18 stores open, split between 10 dual Simply Be and Jacamo stores and eight High & Mighty stores following several closures.
It had earlier announced the closure of five dual fascia Simply Be and Jacamo stores as a result of weak high-street footfall, both current and predicted, together with significant higher costs for some stores as property taxes rise.
Together these five stores contributed £5m revenue but accounted for the entire £2m operating loss of its store estate in FY17. The store closures have now been completed, effective end of August.
So, as we’ve seen, a mixed picture that was more encouraging than discouraging. What did CEO Angela Spindler make of it all? She said: "I am very pleased to report continued good trading in the half, with Simply Be the standout performer. We made significant ladieswear market share gains against what remains a subdued consumer backdrop. In line with other retailers, FX rates represent a headwind and this was particularly felt this half.”
For the future, the company expects deals such as those new partnerships and other factors to boost UK sales. This includes selling capsule ranges on other retailers' sites, on both a wholesale and marketplace offering. It also sees a significant growth opportunity in influencer marketing, “working together with bloggers and opinion formers to improve brand cut-through and further strengthen customer engagement.”
But it’s also looking abroad and said the US is its “first priority”, although it also intends to expand to other countries, initially through Global Ship Anywhere technology, which will be live by the end of FY18. Yet while US revenue was £8.1 million in H1, up 6.1% year-on-year, it was down 4.4% in constant currency terms. The company stepped up its marketing investment towards the end of the period in order to drive new customer recruitment.
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