20th Apr 2016 08:57
LONDON (Alliance News) - N Brown Group PLC on Wednesday reported a fall in profit in its recently-ended financial year due to exceptional costs it booked, but revenue was boosted by a continued strong performance from its three 'power brands'.
Despite the mixed past results, shares still fell as N Brown issued a profit warning for the current year. The stock was trading down 13% at 275.09 pence on Wednesday morning, the worst performer in the FTSE 250 index of mid-caps by some distance.
The online and catalogue fashion retailer said its pretax profit in the year ended February 27 fell to GBP72.2 million from GBP78.3 million the year before due to GBP17.2 million in exceptional costs it booked in the first half of the year relating to the closure of its clearance stores, reorganisation costs and VAT-related legal and professional fees.
In the second half of the year, pretax profit grew by 11%.
Revenue, meanwhile, grew to GBP866.2 million from GBP837.2 million, with product revenue up by 4.1% and financial services revenue up by 2.1%. Revenue from the power brands of JD Williams, Simply Be and Jacamo continued to perform well, rising 10% collectively, driven by product improvements and marketing campaigns.
The number of active customers for the power brands grew by 6.9% in the year. On an individual basis, JD Williams revenue rose by 4.7% to GBP151.2 million, Simply Be revenue increased by 16% to GBP103.9 million, and Jacamo revenue was up by 15% to GBP62.8 million.
Online penetration increased by six percentage points to 65%, with online revenue up by 15% and online penetration of new customers up seven percentage points to 72%. Online penetration represents the proportion of N Brown's sales which were generated online.
Online active customer numbers grew by 13%, as the company works to transform itself from a direct mail-led retailer to a digital-first retailer.
In order to continue doing this, N Brown is implementing a new IT platform, although it warned on Wednesday that "a programme of this scale will bring some unexpected bumps in the road". It did say that it has put "a huge amount of effort" into plans and preparations to mitigate these risks.
Once the project is complete, it should lead to cost reductions, increased demand, improved margin and cost avoidance, N Brown said, adding that it expects the benefits to start to ramp up from financial 2018.
N Brown will start the roll-out of the new web platform and new financial services systems into the US in August, followed by a number of smaller UK brands in September. The main brands will move onto the new system in early 2017.
The closure of its clearance stores is part of its strategy to focus more on the online business, which was one reason for the decline in profit. N Brown said it is developing new online clearance tools and will reduce its "aged" inventory position during the course of financial 2017.
N Brown will pay a total dividend of 14.23 pence, which is flat year-on-year.
N Brown warned that trading since the year-end has been subdued with lower year-on-year sales. It said this was due to a more challenging industry backdrop since January, as well as a change to its marketing approach from large TV campaigns to increased investment in digital channels. The retailer did say it expects its performance to strengthen over the half.
In addition, currency headwinds will lead to a full-year pretax profit hit of around GBP3 million, which will lead to a 50 basis points to 150 basis points fall in product gross margin. Further inventory clearance will also contribute to the gross margin decline.
"Looking forward, whilst we face challenging market conditions for the fashion sector overall, and trading since the year end has been subdued, we remain confident in our ability to make further progress this year," N Brown Chief Executive Angela Spindler said in a statement.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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