N Brown claws back customers

Early signs of a recovery at N Brown (BWNG) helped to rehabilitate the fashion and homeware vendor’s shares, which jumped by 11 per cent after three years of persistent declines. The online retailer posted 12 per cent higher adjusted cash profits of £95mn in the year to the end of February, a welcome reprieve after going in the opposite direction for most of the pandemic. 

Although total sales slumped over the past year – which exclude the closure of lingerie brand Figleaves – underlying sales went up4 per cent. Meanwhile, its ‘strategic brands’ – JD Williams, Simply Be and Jacamo – grew revenues by 10 per cent to £381.2mn, and N Brown saw its first rise in active customer numbers in four years, to 2.9mn by year-end.

Chief executive Steve Johnson said he was “cautious in the short-term due to inflationary impacts and consumer behaviour”, but still expected revenue growth of 7 per cent, with a 13 per cent cash margin, over the medium term. Dividends, which have been missing in action since 2020, will be considered for reintroduction in 2023.

N Brown said it will raise prices in the year ahead, having already gone up thanks to inflation and a higher marketing spend. As a percentage of sales, operating costs have stepped up to 36 per cent, from 33 per cent last year. 

At the same time, a persistent legal dispute with insurer Allianz concerning PPI sold to customers of JD Williams, remains a detractor. The insurer has claimed for the £66mn it paid in redress to customers, and N Brown has counterclaimed. A mediation meeting between the two parties in April failed to reach an agreement, and with the case set to go to trial in June 2023, this headwind will dampen enthusiasm for the foreseeable future. Sell.

Last IC View: Sell, 51p, 11 October.