N Brown has issued its second profit warning in less than six months after the online retailer catering cut prices to revive sales.
The owner of JD Williams, Figleaves and Jacamo said it expected profit for the year ending this month to be slightly less than the £88m forecast by City analysts. N Brown had already cut its profit guidance in October but it said in December that the business was on track to meet expectations. The retailer caters predominantly for the over-50s and larger consumers.
The company’s shares closed down 17% at 339p on Wednesday, having dropped by 40% in the past year.
Angela Spindler, N Brown’s chief executive, said that since Christmas the company had cut prices to clear winter stock and attract customers. N Brown sold more clothes as a result but profit margins were hit, she said.
Spindler said: “While 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.”
She said N Brown had relied too much on income from providing credit for customers and not enough on selling products. Withdrawing credit for sales of big items had cut revenue but reduced the risk of bad debts.
The company will continue cutting prices this year and will speed up its overhaul of the business, to complete it in two years rather than four, Spindler said. She said the relaunch of JD Williams with adverts featuring television presenter Lorraine Kelly was paying off.
Analysts at broker N+1 Singer put their “buy” recommendation for N Brown shares under review saying: “While management adopts a positive tone regarding the direction of the business and its potential, lower sales and margins impact full-year 2016 forecasts too. This additional hit to forecasts is disappointing.”
