Outsize apparel retailer N Brown (BWNG) rebounds 6.9% to 337.9p on Wednesday, as a drop in half-year profits meets expectations and averts the need for further earnings downgrades. CEO Angela Spindler (pictured below) outlines positive progress with the retailer's transformation, flags a good start to the second half and assures full-year forecasts will be achieved.
Click here to read interim results from the Manchester-based fashion retailer, focused on structurally-growing plus-size and mature niches poorly served by high street rivals. A 15.9% decline in pre-tax profit to £35 million is in line with downgraded expectations, affected by the ongoing costs of N Brown's strategic transformation from a catalogue business into a 'truly digital first, specialist-fit, fashion retailer'.
The update provides reassurance that N Brown has stabilised its profits performance after a challenging twelve months that has dented investors' confidence – broker Shore Capital leaves its pre-tax profit forecast for the year to February unchanged at £86.5 million (2015: £86.2 million). Moreover, the dividend is held at 5.67p, reflecting Spindler's confidence in N Brown's financial strength and future prospects.
Besides news the financial services business is 'in good shape' with credit book quality improving, Spindler flags a pick-up in retail sales in the second quarter, reflecting improvement in product and pricing and management's ongoing focus on 'power brands' JD Williams, where a turnaround is on track, Jacamo and Simply Be.
Spindler also issues a positive outlook statement: 'Our transformation into a truly digital first, specialist-fit, fashion retailer is on-track and is delivering tangible results, including good trading momentum online. We have previously communicated that this year will be significantly H2 weighted, and that remains the case. H2 has started well, with a pleasing performance in September, in line with our expectations and underpinning our confidence in the full year outturn.'
N Brown, now half way through its investment in the 'Fit 4 the Future' digital transformation project, generated 63% of sales online, up significantly from 58% in the first half last year. Mobile devices now account for almost two thirds of online traffic, with the youth-oriented power brands Jacamo and Simply Be boasting particularly high online participation.