N Brown reported good third quarter growth despite the unseasonal weather that affected many fashion retailers. Here’s the City’s reaction.
“N Brown continues to demonstrate that its transformational strategy from a direct mail to a digital-first model is on track. Total group revenue rose 4.1% in the 18-week period to January 2, 2016, enhanced by a strong performance over Cyber Weekend and the weeks following Christmas.
“Its fledging US business continues to perform well, having seen revenue rise 28% year-on-year in actual currency over the period.
“Despite the warm weather that has posed a challenge to retailers, N Brown saw product revenue for the group rise 4.3%, thanks to further improvements in product quality and fashion credentials.
“Along with its digital-first approach, comprehensive product modernisation and strong PR activity for autumn/winter 15 drove all three of its power brands to deliver double-digit growth”
Rebecca Marks, Verdict Retail
“Along with its digital-first approach, comprehensive product modernisation and strong PR activity for autumn/winter 15 drove all three of its power brands to deliver double-digit growth, bridging the gap for the 50+ market and plus size fashion segments. However, despite its digital presence in-store, its store portfolio couldn’t deflect the impact of reduced footfall across the high street during this period, resulting in flat like-for-likes.
“Beyond N Brown’s fashion fascias, its sustained focus to drive growth through its homewares division returned positive results. Driven by furniture, home textiles and beauty, homewares was its best performing category over the period. Online positive trading momentum was helped by investment in digital marketing initiatives.
“Brand awareness campaigns with strong product placement saw active customers rise 1%, underpinned by 12% customer growth across its power brands combined.
“Online penetration advanced by 5pps to 66%, helping drive the group’s online sale increase of 13%. Continued improvements in its mobile offering saw customer usage grow, accounting for 68% of all of its online traffic. However, the global release of N Brown’s new web platform has been pushed back to early 2016, having identified additional opportunities to improve the customer experience.
“Encouraging transformation in the business has set the group on good ground to perform in line with its full year expectations. However, driven by its seasonal mix, from its own labels to promising collaborations with Coast for Simply Be, an update in product gross margin guidance for the year end has seen a positive change from -75bps to flat.” – Rebecca Marks, Verdict Retail
“N Brown has delivered a solid third quarter trading update, with strong trading trends from Black Friday and across the power brands. Financial services revenues and margins were both ahead of expectations and profits are on track to meet market forecasts.
“The shares look oversold against the sector and should recover lost ground. The real question of whether N Brown can deliver long-term, meaningful growth remains an active debate, which is why we expect the shares to remain on a sector discount.” – John Stevenson and Jonathan Pritchard, Peel Hunt
“N Brown is on track to meet expectations and is well placed to deliver future growth and significant cost savings, albeit phasing will shift slightly today owing to F4F project timing. Some had their doubts about changes to the strategy, but today’s figures underpin the strategic improvements and should gain support today. Given the collapse in the valuation there is a significant value opportunity at current levels.” – Matthew McEachran, N1 Singer Equity Research
“A well-executed Christmas given the weather impact elsewhere. Sales growth is slightly better than consensus. Management states it is on track to meet full year expectations and we believe BWNG has reached the point in its business transformation programme where operational gains should start to flow through.” – Kate Calvert, Investec
“Given the online trading boom at Christmas, expectations should have been high for home shopping group N Brown ahead of today’s quarter three, but the warm weather also made life difficult and although overall sales growth was decent enough at +4.1% like-for-like, the gross margin took a bit of hit, to leave profit forecasts unchanged.” – Nick Bubb
“We believe an increasing portion of the financial services administration charges are transferred internally to support the retail operations, which indicates that the underlying retail margins have declined substantially over the past three years and sales have disappointed.” – Mike Dennis, Cantor Fitzgerald
“Overall we concur with management in characterising the trading performance in quarter three as a good one, particularly at the top-line, where there has been some variability in momentum over the past 24 months from the company.
“Within the margin lines we note that product gross margin expectations have been lowered, reflecting the impact of the unseasonal mild autumn, with financial services gross margin guidance raised higher.
“The positive online momentum is further underscored by the fact that three-quarters of all new customer demand was online”
Clive Black, Shore Capital
“The positive online momentum is further underscored by the fact that three-quarters of all new customer demand was online. The management is pleased with the overall online progression, which embodies rising frequency rates and units per basket growth, within a context of flat average selling prices. Conversion and abandonment rates improved in the period and the robustness of the group’s network held up, with 66% of all traffic coming from mobile devices (1000bps growth year-on-year), a feature of the wider market.
“Also pleasing for management, given the emphasis within the group’s strategy, was the sales progress from the stable of power brands. Management also points out that these key brands had a good festive trading period whilst the business is said to have traded well through Cyber Weekend.
“In the US Simply Be is said to be performing well, delivering 28% growth year-on-year (20% in constant currency). N Brown continues to apply a measured approach to its expansion in the US at this time, bearing in mind that it has the commissioning of its international online platform in 2016.” – Clive Black, Shore Capital