N Brown, the retailing business behind Simply Be and Jacamo, is seeing better signs for the future after a disappointing run last year.
The company reported a 2.5% rise in first quarter sales - 1.5% on a like for like basis - and repeated its full year forecast, although it said profits would be weighted towards the second half of the year. First half figures would therefore be below last year’s figure. Chief executive Angela Spindler said:
We have had an encouraging start to the year, but there remains a lot to do. We have seen double digit growth in both Simply Be and Jacamo... Although revenues were slightly down year on year JD Williams continues to show signs of progress with new recruits up 17%.
During the quarter we continued to streamline our organisation and our processes to embed a digital first model. This year will be more significantly second half weighted as the planned benefits of the changes made flow through, and we become more aligned with typical retail phasing.
The news has seen the shares rise 10.7p to 363.3p.
In a hold note John Stevenson at Peel Hunt said:
N Brown has come out of the first quarter with forecasts unchanged and trading broadly in keeping with expectations. There are headwinds, with revenue investments and a ramp-up in store openings likely to depress first half profit before tax below the prior year. We also retain our concerns over gross margin delivery, which we see as the biggest risk to numbers this year. Operationally, however, progress remains good, with double-digit sales growth in power brands and steady progress in JD Williams. Trading on 13.5 times 2016 PE, that is enough to retain investor support.
Investec’s Kate Calvert also issued a hold recommendation:
Management’s actions to modernise the business continue to weigh on the financials. Full year estimated pretax profit trimmed by 4%.
While we like N Brown’s market niche and believe it has the potential to become a growth story again, valuation is not compelling enough. There are too many moving parts/unknowns, particularly with regard to credit, cost and mix changes, to have enough confidence in forecasts.
And retail expert Nick Bubb said:
The embattled chief executive of N Brown, Angela Spindler, has been under some pressure after the disappointing performance of the business last year, as the transformation of the home shopping business continues apace. But any further disappointment has been avoided today, with the first quarter sales figures (for 13 weeks to May 29) coming out ahead of last year by 1.5% like for like despite the difficult season in Fashion, and full year guidance is unchanged. Mind you, there are a lot of moving parts in the N Brown group, and as she says “although we have had an encouraging start to the year, there remains a lot to do. ”
