N Brown falls to loss as sales tumble

After years of revenue falls, it isn’t a surprise to report that N Brown’s (BWNG) top line moved in the wrong direction in its latest half-year period. In an update back in June, management pointed to unhelpful Spring weather and low consumer confidence as key factors behind weak trading. The Aim-traded online clothing and footwear retailer swung to a loss here as wet weather in July and August also put shoppers off changing up their wardrobes.

Revenue contraction was, unsurprisingly, seen across both the company's divisions. The broader post-pandemic ecommerce comedown is hurting. Product revenue fell by 11 per cent to £188mn. Lower retail sales had a knock-on impact on financial services revenue, which was down by 9 per cent to £110mn.

A glance at the company’s key performance indicators highlights the scale of the challenge as it tries to turn things around. Website visits fell by 13 per cent, order numbers fell by 18 per cent, and active customer numbers fell by 14 per cent against last year.

On the plus side, the gross margin was up 40 basis points, helped by improved freight rates and lower underlying financial services arrears. And adjusted cash profits of £18mn were in line with board expectations. Management forecasts profits of £45mn for the full year, although this would be a £12mn annual fall. 

With sales headwinds set to continue, we see no reason for an upgrade. House broker Shore Capital said that strategic progress has provided a basis “to ponder a return to much stronger profit growth and cash generation in the medium term”. That looks like wishful thinking based on the current evidence. Sell.

Last IC view: Sell, 24p, 06 Jun 2023