N Brown lowers full-year profit guidance

9th Oct 2014 07:23

While interim results were in line with reduced expectations, clothing retailer N Brown lowered guidance for full-year profits after the second half started weakly due to mild weather.The board now expects the pre-tax profits of between £88m-£92m, before expected reorganisation costs of around £5m.Not only were sales hit by the milder autumn than the industry had expected, despite several mild autumns in recent years, but marketing investment made at the start of the quarter has not produced the desired outcome, according to house broker Shore Capital, so negatively impacting margins.Chief executive Angela Spindler said "re-setting" expectations would allow the management team to focus on "implementing at pace the important and necessary changes to the business which we believe will provide the platform for the group to access a faster rate of growth in the future".Interim results for the 26 weeks to 30 August were slightly ahead of subdued expectations.As the company remains in transition under Spindler's leadership, after she joined in July last year and introduced a fresh perspective and dynamism, the first-half performance was held back by planned changes to seasonal trading and marketing strategy, investment in the core group IT and business infrastructure.Total group revenue was down 0.6% on the same period last year to £407.3m mostly due to lower sales from the re-launching JD Williams and like-for-like sales, excluding newly opened stores, were 0.5% lower.Profit before tax fell 3.2% to £42.7m due to losses from the US and Simple Be stores, with adjusted earnings per share were 7.9% lower year-on-year at 11.56p, while the interim dividend was maintained at 5.67p.Encouragement came from slight growth in Simply Be and strong growth from Jacamo, while the expanding stores estate - a key part of Spindler's plan - saw like-for-like revenue increase by 17% while US online sales were 16% ahead.ShoreCap analyst Darren Shirley said the re-set was "clearly disappointing" and "doubly so" given the cross over with the JD Williams re-launch, but not such a surprise after Next's recent weather-related update.