N Brown is thinking bigger

Rock legends Queen once sang that "fat-bottomed girls" make the world go around. They certainly keep business booming at a catalogue retailer N Brown - 50 per cent of the clothes it sells are for women who are size 20 or more, the so-called outsized market. And it has carved out a large niche as the UK's pre-eminent supplier of mail order clothing for bigger and older shoppers.

Research suggests that its market is growing in more ways than one. The government's Office for Science forecasts that 28 per cent of the UK's women will be obese by 2015 - that's up from 23 per cent today. And a further third of the adult female population is considered overweight.

Of course, when it comes to obesity, the UK does not have a patch on the world's fattest country, the good old US of A, where already more than one third of adult women are classified obese. So, no surprise that N Brown is considering selling into the US. That said, investors with longer memories will instinctively be concerned when a UK retailer expands into the US; even retailing giant Tesco has struggled to establish itself there.

However, N Brown has already proved that it can expand successfully overseas, even while adopting a highly cautious approach. It launched a German language version of its Simply Be range a year ago, which, from a standing start, had grown to sales of £1.1m within six months. Orders from Germany are still shipped from the UK, and Brown plans to adopt the same approach for the US. The company recently said that market research in the US is "showing positive opportunities", and it could start selling Stateside in the second half of this year.  

International expansion is sensible, too, given that other retailers have recognised the lucrative potential of the UK's oversized clothing market and may up their efforts to grab some of the pot. Fellow online retailer Asos recently launched its 'Curves' range, although analysts point out that it is aimed at younger women than N Brown's core audience, whose average age is 55. Besides, Freddie George, an analyst at stockbroker Seymour Pierce, thinks that competition is not an issue because the UK market is under-serviced. Indeed, Mr George reckons that Asos has more to fear from N Brown than the other way round, as Brown appears to be enjoying some success in securing sales from a younger, curvier audience.

Targeting younger customers is also likely to see N Brown increase the proportion of internet transactions in its sales mix, which has a proven impact on lowering costs and increasing sales. Currently, only 39 per cent of Brown's business is web-based. But online sales are growing quickly, up 13 per cent in the 19 weeks to 9 January, against a 5 per cent increase in overall sales. That's partly because web users tend to spend around a quarter more per transaction than those buying via print catalogues.

And there are other advantages in servicing an older client base, which is getting more web savvy. One is that fewer older customers still have mortgages, so they are unlikely to suffer a squeeze on their disposable income if mortgage costs rise this year. N Brown isn't entirely immune to weakening consumer confidence, though, and it has had to tighten up credit procedures after raising bad debt provisions last year. But it reported signs that its debtor portfolio is stabilising, which, along with tight cost control, is helping it to reduce its debt.