N Brown sales sashay higher in third quarter

19th Jan 2017 07:53

(ShareCast News) - N Brown made strides over the festive period, with revenue growth accelerating at the specialist-fit clothing retailer in its third quarter.The FTSE 250 group, which is being revamped by chief executive Angela Spindler, grew revenue 4.1% in the 18 weeks to 31 December, up from the 2.1% in the 13-week second quarter and 1% across the first half as a whole.In light of what continues to be a challenging period for the fashion industry and as the company is still in the process of delivering some key elements of her transformation plan, Spindler said the group was "on track" to meet full year expectations despite the improved sales and rejigged full year profit margin guidance.But she was overwhelmingly pleased: "I am pleased to report a good trading period, with standout performances from Ladieswear and the Simply Be brand. All key brands and categories grew in the period, including our Traditional titles which had diluted performance in the first half.""We are benefitting from improved trading agility as a result of the transformational changes we have made. This was reinforced by our performance across Cyber fortnight which resulted in two record-breaking weeks for the business. In light of our trading performance, as we approach the year-end, we are comfortable with current market expectations."Product revenues were up 5.9% over the period, with the 'power brands' of JD Williams, Simply Be and Jacamo driving 10% revenue growth, while the 'support brands' and traditional segment both recorded low single-digit revenue growth.Overall, online penetration increased by four percentage points year-on-year to 70%, with total online sales up 12% as a record 77% of new customer demand was generated online during the period, up 2ppts on last year.But financial services revenue, where customers are given a credit account for their purchases, fell 0.5%, though gross margin guidance for the full year was bumped up to a 75-125 basis point improvement due to continued improvement in the quality of the credit book.The gross margin guidance range for product however was narrowed to a fall of 100-150bps from the wider 50-150bps due to focused and planned promotions.Also, guidance for the increase in group operating costs was narrowed to a range of 3-4% from 2-4%, predominantly due to higher volumes.Broker Shore Capital was impressed that against a challenging comparative and tough market backdrop, the 5.9% product sales growth was comfortably above its and consensus expectations of 3.7%. "A good job done in Q3 with more necessarily to come, we look at N Brown with increased confidence about the future noting its undemanding earnings multiple of 8.9x to Feb 2017, its deeply discount EV/EBITDA ratio of 4.9x and a particularly fulsome dividend yield of 7.0%, which with further on-track delivery becomes increasingly sustainable," analysts said.Jamie Constable at N+1Singer agreed that, trading at 8.8 times February 2017 earnings with 7% yield and a 2018 p/e of 8.4x the stock was "hardly expensive".He added that he liked its exposure to the C2, D, E exposure which is what I am looking for in 2017 for consumer stock exposure. All about UK consumer disposable income through 2017 and one to have a watch list through H1.