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N Brown modernises

N Brown's restructuring programme resulted in losses last year, but should now pave the way for growth
April 29, 2015

Modernising N Brown (BWNG) is proving tougher than expected. Underlying pre-tax profit at the plus-sized clothing retailer fell 13 per cent to £86.2m last year as the group cut prices, invested in product quality and changed its marketing strategy. Reported pre-tax profits, which included £12.6m of exceptional charges relating to restructuring and a VAT settlement with HMRC, plunged even further.

IC TIP: Hold at 336p

The warm autumn weather also hit clothing sales, particularly at JD Williams - the biggest division - where like-for-like sales fell 3 per cent. Sales at Simply Be and Jacamo rose 64 per cent to £13m, driven by a ferocious store opening programme, but divisional losses increased slightly to £1.8m, which was at least a better outcome than expected.

However, chairman Andrew Higginson said that the investments had laid "important foundations for profit recovery and long-term growth". For example, changing the pricing architecture at JD Williams caused a short-term headache, but after three months cash margins improved. A move towards cash purchases, away from credit, is appealing to more customers.

Broker Peel Hunt expects a recovery: pre-tax profit of £90.5m and EPS of 25p this year, up from £86.2m and EPS of 21p in full year 2015.

N BROWN (BWNG)
ORD PRICE:336pMARKET VALUE:£1bn
TOUCH:336-337p12-MONTH HIGH:534pLOW: 282p
DIVIDEND YIELD:4.2%PE RATIO:19
NET ASSET VALUE:175pNET DEBT:50%

Year to 28 FebTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201171994.526.012.4
201275396.929.313
201378596.428.513.7
201481996.827.114.23
201581876.317.514.23
% change--21-35-

Ex-div: 2 Jul

Payment: 31 Jul