TIDMBWNG
RNS Number : 3309R
Brown (N.) Group PLC
14 June 2018
14 June 2018
Q1 TRADING STATEMENT FOR THE 13 WEEKS TO 2 JUNE 2018
A SATISFACTORY PERFORMANCE IN A CHALLENGING PERIOD
OUR FULL YEAR EXPECTATIONS ARE UNCHANGED
N Brown Group Plc, the online, specialist fit, fashion retailer,
today announces the following trading update covering the 13 week
period to 2 June 2018.
Q1 highlights:
-- Group revenue +0.4%
-- Product revenue -2.8%
-- Financial services revenue +9.0%
-- Total online revenue +3% and Power Brand online revenue +9%
-- 75% of total revenue now generated online, and 84% for new customers
-- Total and Power Brand active customers (12 month rolling
basis) both broadly flat year-on-year
-- In line with our online strategy, consultation begun to consider closing our 20 stores
-- Full year guidance unchanged, aside from exceptional costs
relating to these proposed store closures
Revenue yoy growth FY18 FY19
Q1 (13wks) Q2 Q3 (18wks) Q4 (8wks) FY (52wks) Q1
(13wks) (13wks)
----------- --------- ----------- ---------- ----------- ---------
Product +10.2% +4.9% +2.7% (4.1%) +4.1% (2.8%)
----------- --------- ----------- ---------- ----------- ---------
Financial Services (4.9%) +7.2% +4.6% +8.2% +3.5% +9.0%
----------- --------- ----------- ---------- ----------- ---------
Group +5.6% +5.6% +3.2% +0.0% +3.9% +0.4%
----------- --------- ----------- ---------- ----------- ---------
Angela Spindler, CEO, commented:
"As highlighted in our full year results, this was a challenging
period for fashion retail. Against this backdrop and a double-digit
comparative in Product revenue, I am satisfied with our Q1
performance. At this early stage in the financial year our full
year expectations are unchanged.
"In line with our online strategy, and given continued weak high
street footfall, we have today commenced a consultation process
with colleagues over the future of our small store estate. This
action has not been taken lightly and we will do all we can to
support the colleagues affected during this process.
"We continue at pace our journey to become a global online
retailer, uniquely delivering fashion that fits. This will underpin
our future growth, both in the UK and Internationally."
Q1 performance
Product revenue
Product revenue by brand % change
yoy
-------------------------- ---------
JD Williams -2.0%
Simply Be +9.3%
Jacamo +2.0%
-------------------------- ---------
Power Brands +2.7%
-------------------------- ---------
Secondary Brands -9.1%
Traditional Segment -9.8%
-------------------------- ---------
Product Revenue -2.8%
-------------------------- ---------
In line with our strategy, Power Brands outperformed. The
relaunched JD Williams brand continues to perform well. As
expected, there remains a headwind from the migrated Fifty Plus
customers, although we are confident that the actions we have taken
will address this as we move through the year. Excluding these
customers, JD Williams was up double-digits.
Simply Be's performance was strong, against a particularly tough
comparative. The reported revenue of both Simply Be and Jacamo was
diluted, by approximately three percentage points, by a weak
performance of our store estate during the period.
The revenue decline in Secondary brands reflects the planned
shift in marketing investment away from Fashion World, towards
Power Brands. Traditional revenues declined as we focused on the
online element within this segment, and reduced our recruitment
activity in the declining offline segment, as guided to in our full
year results. We would expect this dynamic to continue through the
year.
Product revenue by category % change
yoy
----------------------------- ---------
Ladieswear -4.2%
Menswear -3.2%
Footwear & Accessories -5.4%
Home & Gift +0.8%
----------------------------- ---------
Within Home & Gift we saw a particularly strong performance
in the Furniture and Outdoor Living categories.
Online metrics
Our online performance continues to be encouraging, with online
revenue up 3%, and up 9% in our Power Brands. 75% of revenue is now
generated online, up 5ppts year-on-year. For new customers, online
penetration was 84%, up 6ppts year-on-year.
Overall traffic was up 3% year-on-year, however traffic to our
Power Brands was up 14%. Smartphones now account for 57% of all
sessions, up from 51% last year, with mobile devices as a whole
accounting for 75%.
International
International revenue was down 8.0%, or down 5.2% in constant
currency terms.
Revenue from the USA was down 15.9%, and down 7.2% in constant
currency. This performance was impacted by significantly reducing
investment in offline recruitment, in line with our wider strategy.
We have also transitioned to new agencies in the USA, in order to
support our digital approach. Marketing spend has been deferred
into the second half to support exciting new initiatives and drive
a stronger trading performance.
Revenue from Ireland was flat, or down 3.2% in constant currency
terms, again driven by a reduction in offline recruitment
activity.
Stores
We are focused on becoming a global online retailer. Reflecting
this strategy, we have undertaken a review of our store estate.
Given continued very disappointing footfall, and despite
significant cost efficiencies being achieved, we are today entering
into a consultation with store colleagues to consider closing our
20 stores ahead of lease expiry. In FY18 these stores generated
GBP15m revenue (2% of Group revenue) and an EBITDA loss of
GBP3m.
We anticipate that the consultation process will be completed
around the time of our half year results in October. Should the
decision be taken to close all 20 stores, we anticipate an
exceptional cost of GBP18m to GBP22m, of which approximately half
will be in cash.
Financial Services
Revenue from our Financial Services business was up 9.0% year on
year, against a weak comparative. This performance was in line with
our expectations. Within the revenue performance, interest lines
were up double-digit, whilst non-interest lines were down
double-digit, continuing the trends reported during the last
financial year.
As part of our full year results we detailed the impact of
moving from IAS39 to IFRS9 on our receivables provision accounting.
Further to this, on 8th May, we confirmed that undrawn credit
balances will be excluded from the IFRS9 provision. Our first half
results in October will be the first time we report under IFRS9,
with FY18 results restated to reflect the new accounting standard,
and an associated reduction in net assets. For FY19 as a whole, we
anticipate an IFRS9 provision of between GBP105m and GBP125m,
compared with an IAS39 reported provision in FY18 of GBP49.2m. We
continue to expect the FY19 P&L impact to be broadly neutral
versus the FY18 restated results.
FY19 Guidance
Aside from the exceptional cost guidance, as discussed above,
all other FY19 guidance is unchanged.
-- Product gross margin flat to +100bps
-- Financial Services gross margin -100bps to -200bps
-- Group operating costs +1.5% to +3.5%
-- Depreciation & Amortisation GBP32m to GBP33m
-- Net interest GBP12m to GBP13m
-- Tax rate c.22%
-- Capex c.GBP40m
-- Net debt GBP425m to GBP450m, which assumes GBP25m to GBP50m
growth in the Financial Services customer loan book
-- Exceptional costs GBP22m to GBP26m, with the majority related
to proposed store closures, as discussed above, together with
c.GBP4m advisory fees associated with our ongoing legacy tax
cases
Reporting calendar
We will be announcing our first half results on 11(th) October
2018.
For further information:
N Brown Group On the day 07887 536153
Angela Spindler, CEO Thereafter 0161 238 1845
Craig Lovelace, CFO
Bethany Barnes, Director of Investor
Relations and Corporate Communications
MHP Communications
Andrew Jaques / Simon Hockridge / Nessyah 0203 128 8789
Hart NBrown@mhpc.com
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END
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