N Brown has issued a profit warning as it becomes the latest fashion retailer to be hit by unseasonably warm weather in September.

The plus-size fashion retailer now expects pre-tax profits for the year to be in the range of £88m to £92m, 12%- 15% down on some analysts’ forecasts. The new guidance does not take into account fair value adjustments and reorganisation and restructuring costs estimated at £5m which are expected to be incurred in the second half.

N Brown chief executive Angela Spindler said: “In common with a wider clothing sector which has been adversely affected by unseasonably mild autumn temperatures in September and so far in October, our own performance has also been impacted.

“Whilst we see early signs of promise in JD Williams’ relaunch, and our programme of change in the business is progressing well, as a consequence of the weak start to the second half, the board believes it is prudent to re-set expectations for the group’s performance during this transitional year.

 “This will also allow the management team to focus on implementing at pace the important and necessary changes to the business which we believe will provide the platform for the group to access a faster rate of growth in the future.”

In the first half pre-tax profit fell 3.2% to £42.7m on sales that slipped 0.6% to £407.3m in the 26 weeks to August 30. Like-for-likes across the group fell 0.5% but surged 17%in stores. N Brown will have 14 Simply Be/Jacamo stores trading by Christmas.

Online accounted for 58% of sales and shops 3%.

Softer trading

The group sales fall was primarily driven by softer trading at JD Williams. N Brown chairman Andrew Higginson said the group decline can also be attributed to the “planned later phasing of our product season and marketing activities as well as the changes we have made to our credit policies”.

Spindler said: “We have stepped up the pace of change in the business designed to unlock the potential value we see in a proposition built around fashion that fits.

“In modernising the way we operate and the way we go to market, we are focused on: attracting more customers by raising brand awareness and broadening our appeal; building customer loyalty through further product and service improvements; and creating a modern scalable infrastructure so that the business is fit for the future. Despite the negative effects of recent market conditions on performance, I am confident that we are taking the right actions and are making good progress.”

Higginson said: “The benefits of re-phasing will not flow through as expected during the second half as a result of the very difficult market conditions across the clothing sector in recent weeks. In re-setting expectations for the full year, the board believes it is taking full account of these pressures on performance and also giving the management team the time and space it needs to push on with the necessary programme of modernisation which is equipping the business to access faster growth in the future.”

Overall gross margin improved by 40 basis points “due to an improved bad debt and financial income yield performance which has resulted from the success of our tightened credit policies”. However product gross margin declined by 50 basis points. 

N Brown has identified £2m of cost savings within sales and administration costs, including organisational and marketing changes already initiated, for the second half.

The retailer has invested in recruiting more customers by “re-shaping” its marketing programme, altering the phasing and the focus of activities and investment.  “This later phasing of activity and spending is now more in tune with how customers shop today, particularly at seasonal peaks, rather than how it is typically organised in a traditional catalogue company,” Spindler said.

Marketing spend

N Brown has re-aligned its marketing spend from a 50:50 seasonal balance in the past to around 40:60 for the spring/summer versus autumn/winter.

N Brown has also accelerated the reduction of marketing investment in catalogues, with spend reduced by almost a quarter during the first half. That investment has been redeployed into digital customer recruitment marketing and TV advertising.  

The retailer’s overall active customer base was up 3.7% in the half, although N Brown said it would not see the benefits of these shoppers on its bottom line until next year.

It said its re-launch of JD Williams “whilst difficult to interpret during a period of period of warm, dry early autumn weather, is showing encouraging signs”.  The group has hired new brand ambassador Lorraine Kelly for the brand.

The retailer has also improved the flexibility of payment options, and said the move is “encouraging more people to shop with us because access to our credit offer is no longer a barrier for new customers”.  

In the US product demand grew by 16%, lower than expected.

N Brown said it has invested in product quality in the half to increase loyalty.