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A change in regulator is costing N Brown

A change in the regulator is causing major havoc for the clothing retailer
September 22, 2016

It's only a matter of weeks since we advised offloading N Brown (BWNG), and the shares have already suffered a further blow. We mentioned, as part of our original sell case, that the group faced uncertainty over an impending decision from the Financial Conduct Authority (FCA), relating to a new regulation of its high-cost credit 'financial services' business - through which N Brown typically earns a meaty chunk of sales and gross profits.

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Well, there's good news and bad. To start on a positive note, the group's subsidiary business, casual fashion retailer JD Williams, has been granted full authorisation from the FCA to provide financial services. A new group website platform in the US is also due to go live in the next few days - albeit later than planned - but the rollout of a new UK-based site looks set to be delayed, and possibly more expensive than first thought.

Now, the kicker. The group says it has identified an error in relation to previous calculations of its financial services customer complaint redress process. It says it has notified the FCA and will have to undertake a thorough review. In the meantime, it expects an exceptional cost of £5m-£8m.