Plus-size fashion specialist N Brown's (BWNG) shares bomb 13.7% to 272.3p on a profit warning in all but name, the Manchester-based retailer flagging weak first quarter sales and downgrading margin guidance. This overshadows in-line finals from the Jacamo-to-JD Williams brand owner, which highlight positive progress with its strategic transformation.

Click here to read results for the year to 27 February from the specialist fit clothing purveyor behind the Jacamo, Simply Be and JD Williams brands, not to mention Figleaves and High & Mighty. Operating in the under-served plus-size and 50-plus fashion niches, N Brown is now half-way through a transformation from a catalogue-led to a digital-first retailer designed by CEO Angela Spindler (pictured below).

[caption id="attachment_69797" align="aligncenter" width="475"]04.10.13. Photo credit : Phil Tragen 04.10.13. Photo credit : Phil Tragen[/caption]

Looking at the highlights, there's much to like. Underlying profit before tax is very much in-line with expectations, down 2% to £84.5 million in a year of significant, but necessary, capital investment and a flat total dividend of 14.23p comes as no surprise to the market. Spindler also flags an encouraging 11% improvement in second half profits to £49.5 million, positive trends across aforementioned 'Power Brands', growing online sales penetration, not to mention a second half profits breakthrough in the USA.

Jacamo Freddie Flintoff

Why then, are the shares so out of vogue today? This reflects a disappointing outlook statement, N Brown following Next (NXT) CEO Simon Wolfson and new Marks & Spencer (MKS) boss Steve Rowe in bemoaning a more challenging clothing market, the British consumer becoming more cautious.

N Brown warns that 'trading since the year end has been subdued, with sales lower year on year. This is the result of two factors. Firstly, the industry backdrop has been more challenging since January. Secondly, we adjusted our marketing approach this season, shifting from large TV campaigns to a more phased approach across the half, with increased investment in digital channels. This new approach delivers a better ROI on our marketing investment when viewed across the season as a whole. We expect, therefore, to see performance strengthen over the half.'

Web - N Brown - Apr 16

Downgrades to FY17 margin guidance are also unsettling investors, the retailer guiding towards a drop in product gross margin of between 50-to-150 basis points due to a foreign exchange headwind, as well as the decision to clear 'legacy aged inventory' and slash prices to stimulate sales.

Accordingly, house broker Shore Capital lowers this year's pre-tax profits estimate from £91 million to £85.2 million and again forecasts a flat shareholder payout, whilst downgrading its February 2018 pre-tax profit estimate to £93.7 million.

Issue Date: 20 Apr 2016