N Brown upbeat despite loss, to focus on UK and star brands, US on back burner for now
But the company remains upbeat that it’s on the right track for future growth and still managed to report higher digital revenues for its star brands, despite “the ongoing challenging market conditions for fashion retail.”
And it announced a big strategy shift, saying it will add product to its webstore faster and that it’s now focusing mainly on the UK and Ireland with a step back (for now) from the US, even though Simply Be continues to be available there.
Its investors seem to think it’s getting it right and the firm’s shares surged over 10% in early Thursday trading.
Overall, revenue fell 0.8% to £914.4 million from £922.4 million in the year to March 2 as it closed stores and the environment remained tough. And product revenue dropped 5.6% to £615.8 million, of which JD Williams accounted for £159.5 million, Simply Be £131.5 million and Jacamo £64 million. The rest was made up of its smaller brands and its financial services (the latter rising 10.8%). The product gross margin was flat at 52.1%.
Statutory earnings fell to a loss of £57.5 million from a profit of £16.2 million a year earlier, but £145.6 million of one-off costs were mainly to blame as it moved to becoming digital-only. Adjusted pre-tax profit rose 2.5% to £83.6 million.
CEO Steve Johnson called out the firm’s "solid trading performance” and highlighted digital revenue growth across the three star brands “as we improve our customer offer, while managing the decline of our legacy offline business.”
In fact, digital revenue at JD Williams was up 8.8% even though its total revenue fell 1.2% “due to the drag from migrated Fifty Plus customers, one of [its] legacy offline brands”. At Simply Be, digital was up 8.7% and total revenue rose 4.4%, while Jacamo rose 5.1% digitally and 3.9% altogether.
EFFICIENCY AND NEW STRATEGY
The company also benefited “from improved use of our promotional spend, a strong financial services performance and a drive to ensure we are operating as efficiently as possible across the business.”
And efficiency for the company means that it will “focus on the UK opportunity [and] maximise the UK core market before leveraging our international opportunity.”
In the UK, it said the online clothing and footwear market is forecast to grow by 7% per year for the next five years and it currently has online market shares of 4% and 3.2% respectively in its addressable womenswear and menswear markets, giving it “plenty of headroom to grow.”
Yet it remains “confident that the international opportunity continues to exist following a detailed review of the potential for our brands.” But the “way in which we go to market in the USA will mean an immediate step back from solely driving direct customer business in that market.”
It will continue to explore international territories through selected, targeted partnerships. To this end, it has recently closed JD Williams in the US and, for now, “will only focus on servicing our existing Simply Be USA customers.”
Its Irish business, Oxendales, continues to perform well and the strategy there remains unchanged.
The company also aims to simplify the business to improve the customer experience with a “crisper, clearer brand proposition for our customers.”
Within womenswear, this means its brands will be Simply Be, “for fashionable size 12-32 women,” JD Williams, “for 45-60-year-old women,” and Ambrose Wilson for women 60 and over. Menswear will be the Jacamo brand. Its other brands will remain complementary to its core womenswear and menswear offer “while we finalise our plans and we will provide an update in due course.”
And of course, digital is key. As much as 80%, or around £500 million, of its product revenue is now digital, meaning it’s a top 10 UK clothing and footwear retailer by digital revenue. But the company said that while “we have made solid progress in growing our online market, we know that there is more to do to improve our digital retail model, and our proposition is not yet well enough developed. A re-focusing of our strategy on delighting our customers is now required.”
This will include “better products for our customers” with the firm driving further innovation through its body scanning technology and “pioneering 3D design and product development to deliver continued fit improvements in quality products at affordable prices.” In addition, it will “continue to evolve from design influenced by seasonal trends to key product 'shouts' dropped cohesively in three-weekly cycles and thus allow substantially reduced lead times.”
And it “will trade smarter with data” with “enhanced use of our rich data [having] already unlocked operational efficiencies and improved customer insight in our business.” It said that “substantive investment in new skills and technology platforms, established partnerships with third-party analytics leaders and a ‘test-and-learn’ data culture embedded throughout the organisation are progressing, and there remains significant opportunity to develop these much further.”
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