Flip-flopping guidance from N Brown

Chief executive Angela Spindler slashed the company's pre-tax profit guidance for the full year by 11 to 15 per cent to between £88m and £92m, citing unseasonably balmy autumn weather that caused sales in September to fall 18 per cent year-on-year. The warm temperatures in September and October have affected the entire clothing sector, including the mighty Next (NXT). However, the scale of N Brown's downgrade - just three weeks after the previous market update - casts doubt on the reliability of management guidance.

Despite the bad news, Ms Spindler insisted the changes would provide a platform for faster growth and would unlock long-term value.

As for the interim results, they came in as expected. Sales were flat and profits lower, due to a number of changes implemented in the period. These included the timing of the product season, the phasing and focus of marketing, and tighter credit policies. Operating profit fell 7 per cent to £45m, as the benefits of good cost control were absorbed by losses in the US and the Simply Be stores. However, there was some positive news, such as a 26 per cent increase in the number of JD Williams customers following a brand re-launch.

After much deliberation, the analysts at Investec stuck with their 'buy' recommendation, citing material untapped potential in what is a tightly run, differentiated business. "With modern infrastructure and basic retail disciplines in place, N Brown can become a double-digit growth story," argues Kate Calvert. But she also warms that "investment in N Brown is now a slow burn, as it will probably be spring/summer before we have a clear view of whether the strategy will deliver the step-change in growth we believe is possible." She is forecasting pre-tax profit of £89.2m for the full year, giving EPS of 25p, down from £100m and 28p in 2013-14.