- Annual results beat expectations
- Turnaround plan yielding results
- Improving sales trajectory
Shares in N Brown (BWNG:AIM) rallied 18% to 17.6p after the online clothing and footwear retailer behind the JD Williams, Simply Be and Jacamo brands returned to statutory pre-tax profit and claimed it was positioned for ‘sustainable growth’ amid demonstrable progress with its multi-year turnaround strategy.
The rebound at N Brown, whose shares are down 90% on a five-year view, will be welcomed by retail industry bargain hunter Mike Ashley, whose Frasers (FRAS) conglomerate has built a 20% stake in the Manchester-headquartered company.
BACK IN THE BLACK
Group sales fell 10% to £601 million in the year ended 2 March 2024 against a backcloth of ‘continued challenging market conditions’.
N Brown’s product and financial service revenues were both in negative territory, although the rate of product revenue decline has moderated in the new financial year.
Management expects product revenue to return to a ‘moderate level of growth’ this year, and anticipates a modest improvement in the rate of decline in financial services revenue to boot.
The digital fashion retailer swung from a £71.1 million loss to a statutory pre-tax profit of £5.3 million last year thanks to cost reductions, a focus on driving profitable sales and lower accounting adjustments.
A 12.5% drop in adjusted EBITDA (earnings before interest, tax, deprecation and amortisation) to £47.6 million was better than the market expected and N Brown’s year-end adjusted net debt of £236.3 million was less than half the near-£500 million peak level back in 2020.
TANGIBLE BENEFITS
While last year was one of ‘notable market softness’ as shoppers grappled with cost of living pressures, N Brown delivered encouraging strategic and operational progress including the launch of new product lines across strategic brands.
JD Williams launched its new Anthology premium line, Simply Be started offering select lines in Sainsbury’s (SBRY) stores and Jacamo improved its own brand offer by expanding across the smart casual, denim and footwear categories.
N Brown chief executive Steve Johnson said customers were now seeing ‘tangible benefits from our transformation, with an enhanced experience being delivered by our new websites and our recently launched Product Information Management system ensuring customers have more detailed product descriptions to inform their purchases.
‘Looking ahead, our strong liquidity position allows for continued investment in our strategy, positioning the business for sustainable growth whilst always improving the customer experience.’
THE HOUSE BROKER’S VIEW
Shore Capital stressed that N Brown’s transformation is ‘touching every part of the business in every way, more often than not facing headwinds and negative externalities. With the full-year 2024 results in tow it is most pleasing to speak to the benefits of change emerging and, while there is more to do, the firm is on the downward slope of change.’
The house broker continued: ‘While EBITDA fell year-on-year, full-year 2024 results beat expectations, the sales trajectory is improving, cash balances are strong, and so marketing investment is on the rise.’
Shore Capital left its full year 2025 pre-tax profit estimate unchanged while noting that with a market capitalisation similar to cash balances, ‘there is deep value again in N Brown.’
