N Brown warns on profit in ‘highly promotional market’
Simply Be owner N Brown has slashed its profit expectations, blaming lower revenue from its credit lending service and a “highly promotional market”.
Shares in the plus-size fashion retailer plummeted more than 24 per cent today after it said full-year adjusted profit before tax will be in the range of £70m to £72m, down from a previous estimate of £78m to £84.1m.
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A 4.6 per cent revenue drop in N Brown’s financial services division – which allows customers to pay with credit – has contributed to the cut in profit estimates, as well as heavy discounting.
The company also said that a lower than expected benefit from the IFRS9 non-cash provision estimate has hurt its profit.
N Brown warned that profit in 2021 is likely to be at around similar levels due to the “reduced scope for bad debt provision improvements” and industry-wide regulatory changes.
In a trading update this morning the company announced that product revenue fell four per cent due to the continued managed decline of legacy brands.
Simply Be revenue increased 12.1 per cent year-on-year, however JD Williams revenue fell four per cent and Ambrose Wilson revenue dropped 9.6 per cent.
N Brown chief executive Steve Johnson said: “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.”