Online retailer N Brown has reported weak financial results for the first half of the year, with sales continuing to decline in the third quarter. The company attributes this performance to the normalization of financial services following the COVID-19 pandemic and the current economic environment. Despite these challenges, N Brown has made strategic progress and maintains a strong balance sheet.

Group revenue decreased by 4.6% to £33.5 million, with product revenue falling by 5.2% to £211.2 million. Financial services revenue also dropped by 3.5% to £120.3 million. Adjusted EBITDA fell by 46.9% to £27.9 million, resulting in an adjusted EBITDA margin decline of 6.7 percentage points to 8.4%. Adjusted pretax profit saw a sharp decline of 82.4% to £4.3 million, while statutory pretax profit fell by 74.6% to £7.2 million.

N Brown acknowledges the challenging online retail market due to weakening consumer confidence. The decline in product revenue was primarily driven by its less important heritage brands, which experienced an 11.8% decrease. Strategic brands like JD Williams, Simply Be, and Jacamo only saw a 2.2% decline. However, the third quarter still witnessed a continued decline.

To counteract the softer volumes and inflationary pressures, N Brown has implemented measures such as promotional discipline and measured price increases supported by data tools. The company has also seen average item values increase by 14%. Operational cost flexibility and efficient contract management have generated savings that offset the normalization of returns volumes and inflationary pressures.

Furthermore, N Brown has continued its digital transformation journey, launching a new mobile-first website for Simply Be in September, which provides a better site navigation and checkout experience. The company plans to roll out a new Jacamo site in the first half of 2023.

Looking ahead, N Brown expects trading conditions to remain challenging due to weak consumer sentiment and uncertainty surrounding macroeconomic conditions. It predicts that second-half product revenue will decline at a similar rate to the second quarter. However, the company anticipates additional product margin improvements through pricing responses to cost inflation, a shift in the product mix back to clothing, and ongoing initiatives optimizing pricing strategies using data.

Despite concerns about the macroeconomic environment, N Brown has not observed a significant change in the performance of its debtor book. The company remains well-hedged against US dollar purchases for the second half of the year and the next financial year.

CEO Steve Johnson acknowledges the difficult period of weakening consumer confidence but emphasizes the balance between disciplined trading and the long-term strategy to transform the business. Johnson expresses confidence in the benefits of the new Simply Be website and reaffirms the company’s commitment to investing in digital transformation for sustainable profitable growth.

In conclusion, although N Brown’s first-half financial results show a decline in revenue and profits, the company remains focused on strategic progress and maintaining a strong balance sheet. It continues to navigate the challenges presented by the current economic environment and invest in its digital transformation to drive sustainable growth in the future.

Useful links:
1. N Brown official website
2. Online Retail Industry in the UK