N Brown surprises the market for good with smaller loss

British fashion catalogue retailer N Brown revealed a fall in full- year profits due to the unseasonably mild autumn and the efforts the retailer has been making lately to turn around its figures.

It is worth of remembering that N Brown issued two profit warnings last year following a difficult autumn trading period and on restructuring costs.

Sales at N Brown’s biggest brand JD Williams, which makes up 36 percent of group sales, were down 2.7 percent. Total group revenues were nearly flat at 818million dollars. Besides, online sales now represented 59 percent of its home shopping sales compared with 58 percent last year.

Likewise, the decline was less than expected, taking the group’s shares to add a 5 percent on the trading floor on the wake of the news. The latter was particularly good news, given that the stock has lost 17 percent of its value since the beginning of the year.

"The shares have underperformed the general retail sector by 14.7 percent in the last three months due to the lowered profit expectations...," analyst Mike Dennis of Cantor Fitzgerald wrote in a note.

Silver lining for N Profit: results in line with downgraded forecasts

On a positive note, the company´s trading update showed soaring sales at its Simply Be and Jacamo stores, reported ‘This is Money’. N Brown currently has 15 Simply Be and Jacamo stores in the UK, but said it plans to open another ten.

Analysts at N+1 Singer Equity Research said that, after a very disappointing year and several warnings, today’s results had come in line with downgraded forecasts. But they added that first quarter results, which are to be published on 19 June, would clarify N Brown’s position.

“Guidance for FY16 is in line with previous stated guidance (slightly lower tax charge) and commentary on key areas of the business including financial services, product/pricing, and systems implementation/benefits offer some encouragement from currently depressed levels in terms of the share price.”

Meanwhile, analysts at Cantor Fitzgerald said N Brown did one step forward and two steps back, and therefore, they are recommending to sell the stock at a target price of 320 pence apiece. “This reflects lower free cash flow, lower group trading margin, and current volatile trading conditions.”