16th Sep 2014 08:23
LONDON (Alliance News) - N Brown Group PLC Tuesday posted a drop in revenue for the first half of the year, hit by a fall in sales from its main brand JD Williams, but the home shopping company said it is on track to deliver on its full-year forecasts as it continues to invest in revitalising and expanding its businesses.
The owner of brands including the Figleaves online lingerie store and the plus-size Simply Be brand said revenue in the 26 weeks to August 30 was down 0.6% and by 0.5% on a like-for-like basis, mainly due to a 3% fall in sales at JD Williams. Store like-for-like sales were strong, up 17%, it said.
N Brown is investing heavily in revitalising its online brands to pull in new customers, pushing some of the brands overseas, and is also expanding a portfolio of UK shops to complement its online offering. This is helping to increase its active customer base, which was up 3.7% in the first-half.
"This is a transitional year for the business. Two weeks into September we remain on track to deliver our full-year forecast. The adjustment to the profile of our marketing investment impacts from October and is designed to underpin peak seasonal trading up to the end of the calendar year. This, coupled with weaker comparatives, underpins our confidence in achieving the full-year outturn," the company said in a statement.
N Brown said that planned phasing adjustments to Simply Be & JD Williams fashion ranges held back sales in the first-half.
The retailer also said it reduced marketing investment in catalogues by 24% in the first half, and moved its marketing spend into customer recruitment, but weighted more towards the second half, which it said resulted in a 3.2% sales decline in the second quarter.
It said that whilst JD Williams sales declined, as it continued to modernise its fashion offer for the brand, new customers are up 20% for this season to date.
N Brown said sales in its Home & Gift business were down 9%, due to planned reduction in non-core home and electrical ranges, but the unit delivered some improvements in profitability.
In womenswear, N Brown said its dresses range, fast-fashion offer, and swimwear all performed well in the first half, while good growth in menswear was boosted by strong sales of cargo shorts and t-shirts.
N Brown said it has "sharply accelerated" the pace of its marketing drive, but also has re-aligned its marketing spend, including the timing and amount spend on its direct mail as well as other marketing activities. It said this year it has moved away from a 50:50 marketing spend, to a more seasonal ratio of 40% for Spring/Summer and 60% for Autumn/Winter.
"The combined effect of changes to our category focus, the planned reduction in credit sales from high risk areas and the reduction and re-phasing of our mailing programme has reduced revenues in the half, however we have improved the quality and profitability of our sales," said Chief Executive Angela Spindler in a statement.
The company said it significantly reduced the weight of direct mail sent to customers in the second quarter, and for the first half as a whole, and has shifted spend into new recruitment activities.
"This is a transitional year in which we are moving further away from a traditional mail order model and the changes we are implementing have had the effect of slowing sales growth in the first half and deferring some of our annual sales into the second half," the company said.
Investec analyst Kate Calvert believes the benefits from implementing a more retail/marketing led trading strategy are unlikely to kick-start sales until the third quarter, and therefore forecasts first-half profits to be down year-on-year given the upfront investment in service, offer and new stores.
"The second half will see a plethora of new initiatives, such as the JD Williams re-launch, more in-season newness and a focused marketing strategy," says Investec's Calvert.
N Brown shares were trading 3.5% lower Tuesday morning at 390.92 pence per share.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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