N Brown has warned it will incur up to £40m in exceptional costs this year after unearthing “flaws” in general insurance products it previously sold.
The JD Williams, Jacamo and Simply Be owner said the products were provided by a third-party insurance underwriter and sold by the group to customers between 2006 and 2014.
N Brown, which uncovered the issues following an FCA-triggered industry-wide review, said it now expects exceptional costs for its full year to be between £35m and £40m.
However, the fashion retailer said “there may be mitigating actions” to reduce the overall cost.
It is the latest setback to N Brown, which booked exceptional costs of £25.2m in the year to March 4, due to financial services customer complaint redress.
The business had initially expected those costs to come in at around £12m, but later admitted it had made “an error” in its calculations for redress and underestimated “the likely future costs arising from complaints relating to financial services products sold in the past”.
On the latest setback, N Brown said the vast majority of the general insurance products in question were sold to customers in the period leading up to and including 2011.
Sales of those products ceased in early 2014.
N Brown said the cashflow impact of the £35-£40m forecast would occur from its 2018/19 year onwards, but expects to fund the full cost of customer redress from “existing resources”.
The business added that the issue would not impact underlying operations and said trading continues to be “strong”.