11th Mar 2015 07:47
LONDON (Alliance News) - N Brown Group PLC Wednesday warned that pretax profit from continuing operations will be below its guidance and current market expectations of GBP88 million in the recently-ended financial year, after it further reduced prices in the fiscal fourth quarter to clear stock and compete in the fashion sector.
The online, catalogue and stores retailer, which trades under multiple brands including House of Bath, SimblyBe, jacomo, and figleaves.com, is going through a revamp and is trying to become more retail-led and product focused. However, it's doing this amid fierce competition amongst high-street and online retailers. It moved to an 'all sizes one price' stance and also trialled a 'first price right price' programme.
It said its price investments had been successful in clearing stock and making its fashion goods more competitive, but this had weighed on gross margin in the fourth quarter more than it had expected.
"The strategic price moves were successful, both in terms of driving volume and overall customer response. We have therefore decided to continue them into full year 15/16 as we strengthen our value position further in line with our overall strategy," it said.
Sales in the 13 weeks to February 28, its fiscal fourth quarter, were up 3.6% on the year, while sales for the year as a whole were flat. It had reported lower sales in the second and third quarters. It said its full-year gross margin was in line with expectations.
"Whilst we are disappointed by the slower than anticipated progress from a profit perspective, this is because we are taking the right decisions now - in some areas earlier than anticipated by our previous profit guidance - in order to build a better business for an online world," Chief Executive Angela Spindler said in a statement.
The company said it has also decided to close its small Gray & Osbourn catalogue business after reviewing its profit potential, and this will likely result in it booking exceptional costs of between GBP11 million and GBP13 million in its full-year results. Those costs are in addition to the strategy costs of about GBP5 million that it had previously said it would book. However, the closure won't have any impact on profit expectations, it said.
Looking ahead to the rest of the current financial year, N Brown said it expects gross margin to be flat to 100 basis points lower as it continues its price investments, while operating costs are expected to rise by a mid-single-digit percentage.
It added that depreciation and amortisation will be in the range of GBP25 million to GBP28 million, and net interest costs are expected to be between GBP25 million and GBP28 million. It expects capital expenditure to be between GBP50 million and GBP60 million as it continues to overall is systems and invest in the extension of its warehouse to support future growth.
It said it will give more detailed guidance when it reports its full-year results on April 29.
By Steve McGrath; [email protected]; @stevemcgrath1
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