Shares fall 25% at N Brown, Manchester fashion firm

Shares of Manchester-based fashion retailer N Brown Group fell 25% on Thursday after it said in a trading statement it expects annual adjusted profit to be below consensus estimates.

N Brown’s brands include JD Williams, Simply Be, Ambrose Wilson and Jacamo.

“Predominantly due to a lower than expected benefit from the IFRS9 non-cash provision estimate, combined with lower financial services revenue and a highly promotional market, we now expect FY20 adjusted profit before tax to be in the range of £70m to £72m,” said N Brown.

That’s lower than consensus estimates of between £78 million and £84.1 million.

“Furthermore, we expect that the reduced scope for bad debt provision improvements, combined with industry-wide regulatory changes, will result in FY21 adjusted profit before tax being at a similar level to FY20 adjusted profit before tax,” added N Brown.

In a trading statement for the 18 week period to January 4, 2020, N Brown said digital revenue rose 2.5%, driven by strong growth at Simply Be & Ambrose Wilson.

It said product revenue was down 4% as “we continue the managed decline of legacy brands” and that 87% of product revenue is now digital.

N Brown CEO Steve Johnson said: “This has been an encouraging period of peak trading for the business in a highly promotional market, as we delivered digital revenue growth across both womenswear and menswear with particularly strong digital growth from Simply Be and Ambrose Wilson as customers responded well to our ranges.

“Financial Services revenue was down, reflective of our strategic approach to the retail business and continued tightening of our lending criteria. 

“We are making good progress with our ongoing strategic review and look forward to providing further details at our full year results in April. 

“Our work so far has highlighted the need to have a tighter brand portfolio, a sharper focus on product and a cost base appropriate for delivering sustainable digital growth.  

“At the same time, we will continue to proactively address the accelerating and cumulative external factors which are anticipated to reduce the size of our financial services business over the next two years. 

“These will significantly influence the way we will operate our financial services business and we are taking proactive measures to ensure that the change is managed appropriately.

“This is in line with our strategy of becoming a digitally focused, retail-led business. 

“Our expectations remain that the retail market will continue to be challenging and promotional, but we are focused on our clear strategy of delivering profitable digital growth.”