N Brown strategic brands focus pays off, minimises discounting
That said, on Friday, it reported that for the half-year to August 28, group revenue actually fell 01%, compared to the restated comparable period of the previous year, with a dip to £346.8 million. But that was due to a 5.7% drop in financial service revenues. Product revenues, by contrast, rose 3.3% to £222.1 million. And they helped adjusted EBITDA rise 10.4% to £53 million and pre-tax profit to double to £28.2 million.
The firm’s five strategic brands (the three mentioned above plus Ambrose Wilson and Home Essentials) actually managed to increase their revenues by 14.9% as the “benefits of transformation accelerate” with the weaker overall 3.3% increase being due to the firm’s “ongoing managed decline of legacy brands”.
The company has been stepping up its marketing activity to support its key brands, with the introduction of Amanda Holden and Davina McCall as brand ambassadors for JD Williams, being one of its highest-profile developments. And the retailer said the effectiveness of its marketing outreach (along with the benefits of improved product) was seen in Q2 with a 1.1% increase in active customers compared to Q1. The total number of active customers had actually fallen year-on-year by 5.7%, driven by the decline of those non-strategic brands so that Q2 rise was encouraging. And the half also saw the number of orders per customer increasing by 12.5%, as each customer shopped with the firm more frequently. Average order value also edged up.
To help all this, the company has also been implementing improvements in the digital experience — such as an improved customer checkout — and it has a new in-house studio that “significantly enhances its ability to create customised content”.
As for its outlook for the rest of the year, it’s interesting that the company said that “as a result of our improved product and branding, we have taken the decision to focus on profitable growth, rather than promotion-led sales”.
That approach reflects what we’ve heard from several firms recently and also the latest BDO High Street Sales Tracker. It suggested on Friday that more retailers are selling products at full-price and therefore are less willing to get involved in heavy discounting. This may be a shock to some discount-driven consumers as the festive shopping season gets under way.
Regardless, N Brown now expects full-year product revenue up between 1% and 4%.
CEO Steve Johnson said: “Over the last six months the consumer environment has been volatile. Nevertheless, momentum has continued throughout the business, with customers responding well to our improved product ranges; particularly across our five strategic brands. This is testament to the restructuring work we have done across the group and the investments we are beginning to make to support our refreshed strategy.
“We continue to deliver on our plan and are feeling well prepared for peak trading. EBITDA remains in line with our expectations, and we are looking forward to exciting our customers with our new ranges as we head towards the Christmas peak. However, we do so with the backdrop of continued uncertainty around consumer confidence.”
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