Painful transition to online retailing for N Brown Group

Online retailer N Brown reported half year losses today and a 50% cut in its dividend as it admitted the switch to an ecommerce model was taking longer than predicted.

The Manchester-based group, which includes the ‘power brand’ JD Williams, Simply Be and Jacamo businesses, saw revenues rise by 1% in the six months to September 1, to £457.8m.

But increased exceptional charges of £65.4m, including the cost of closing stores, compared with exceptional costs of £54.9m last year, resulted in a statutory pre-tax loss of £27.1m, compared with a £27.6m loss a year ago.

The board said that, due to these increased costs it has decided to ‘rebase’ its dividend payment to shareholders, and has announced a figure of 2.83p per share, which is a 50% reduction on the previous year. This is also expected to feed through to the final dividend, it said.

“This brings the group’s dividend down to a more sustainable level and from which the group will seek to grow as its earnings progress,” today’s statement said.

Early last month, N Brown chief executive Angela Spindler announced she was stepping down at the end of the month, three months after she announced the closure of the group’s store portfolio due to tough trading conditions. She was temporarily replaced by Steve Johnson.

Chairman Matt Davies said today: “Whereas much progress has been made transforming the business into an online retailer, we have not yet achieved the growth in product or international that we would have hoped for and have decided to rebase the dividend to a more sustainable level from which we will seek to grow.

“We are now in the process of searching for a new chief executive to take the group forward through the next phase of its development.

“In the meantime, we are pleased that Steve Johnson will lead the business.

“We have a strong base on which to build.

“Over three-quarters of our product revenue is now online and we have industry-leading expertise in fashion that fits.

“This is supported by a strong financial services business. Our goal of becoming a world class digital retailer remains unchanged.”

Steve Johnson said: “The group’s adjusted profit was in line with our expectations as we benefited from growth in our online power brands and financial services, along with improved marketing efficiency.

“We were, however, disappointed with our wider product performance which was impacted by the ongoing decline of our legacy offline business and challenging market conditions.

“Going forward we expect offline sales to continue to fall as we focus on online power brand growth.

“While this will hold back revenue in the short term, there are opportunities to drive profit, particularly through improved efficiency, as the business further shifts online, and we accelerate the use of analytics to increase returns on our promotional spend.”

He added: “While first half trends seen in our product business are continuing into the second half, the positive outlook for financial services and scope for further efficiencies mean that our full year expectations are unchanged.”

N Brown said it has an available financing facility totaling £625m, made up of a securitisation facility of £500m and RCF (revolving credit facility) of £125m, both secured until September 2021.

The group’s balance sheet is underpinned by its customer loan book, which at September 1, 2018 was £677.6m on a gross basis and £565.7m on a net basis.