N Brown said clothing and footwear continued its resurgence into the third quarter, with growth of 18%, including increased demand for dresses, formalwear and outerwear, demonstrating the appeal of what it called its strengthened product offer.
The increase came amid a higher returns rate in clothing and footwear, particularly into higher returning segments such as dresses. It noted returns rates, however, are about three percentage points lower than pre-pandemic levels.
Product revenue for the period amounted to GBP181.2m (US$246.6m), down 3.5% from last year. N Brown said product revenue reflects the continued growth in the five strategic brands of +5.5% on the same period a year ago, offset by the managed decline of its legacy other brands, which now represent less than 20% of product revenue.
Excluding the impact of the closure of the Figleaves website in March 2021, product revenue was slightly ahead of the prior year.
Group revenue, meanwhile, declined 3.3% on last year to GBP267.6m.
Total active customers returned to year-on-year growth, reflecting both improved customer retention rates and new customer acquisition. Total active customers ended the period at 2.91m, with Simply Be and Jacamo at record levels.
For the full year FY22, N Brown now expects to report adjusted EBITDA between GBP93m-GBP96m, which is at the lower end of its previously guided range, reflecting the online market conditions and a slightly higher level of project spend now being expensed rather than capitalised. Adjusted EBITDA was previously forecast to be in the range of GBP93m-GBP100m.
CEO Steve Johnson said: “The business has performed resiliently over the peak period and our colleagues have worked tirelessly to deliver for customers in challenging circumstances.
“Against the backdrop of Covid uncertainty, a volatile consumer environment and well-documented supply chain issues, the continued growth of our strategic brands has been particularly pleasing, as has a return to growth in active customers. We are now seeing more people than ever shopping with Simply Be and Jacamo. JD Williams is also resonating well with customers, particularly on the back of our successful partnerships with Amanda Holden and Davina McCall.
“We have continued to execute on our plan and, looking ahead, will continue our strategic investment to transform the business, supported by a robust balance sheet and a strengthened executive team.”
Festive performance dampened by legacy brands
Juliet Cuell, Associate Retail Analyst at GlobalData Retail, notes N Brown’s position in the market has weakened in the third quarter, having shown signs of recovery in its first-half FY2021/22 results in October 2021, with revenue pulled down by a poor performance in its legacy brands.
“Group revenue declined 3.3% to GBP267.6m during the period, though this was a deceleration on Q3 FY2020/21 (-8.8%). However, the online specialist did announce that adjusted EBITDA is expected to be at the lower end of the group’s previous guidance, resulting in its share price falling 4% in early morning trading, reflecting the impact of the Omicron variant on demand for clothing and footwear for social events and shoppers’ return to physical locations.
“N Brown did enter the peak trading period in a good place, with a clear focus on improving product availability – an essential strategy given the ongoing supply chain issues that particularly impacts sectors such as home and electricals. Its clothing & footwear proposition also protected the group from sharper revenue declines during the period, with this segment growing by 18% in Q3, while home and gift declined 19.0%. However, the arrival of the Omicron variant in the latter part of the reporting period and subsequent cancellation of social events did culminate in higher return rates for the online retailer. Return rates did remain three percentage points lower than pre-pandemic levels, indicating that improvements to its sizing guide, including the addition of fit calculator ‘True Fit’, has limited the need to return items. However, N Brown must not become complacent given that the boohoo group recently issued a profit warning attributed to its high return rates.
“Its turnaround plan for the five strategic brands (Simply Be, Jacamo, JD Williams, Ambrose Wilson and Home Essentials) remains fruitful for N Brown, with growth in these brands up 5.5% during the period. The onboarding of brand ambassadors for JD Williams such as Davina McCall in June 2021 has clearly resonated with its customer base and better engagement on social media platforms has paid off as total active customers for the group has returned to year-on-year growth. Yet, rival Next, was an outperformer over the festive period, with it reporting total online sales growing 45.0% over the 8 weeks to 25 December 2021 compared to Christmas 2019, driven by its diverse branded offer, highlighting N Brown must act quickly to better compete such as by adding relevant third-party brands including the likes of Mint Velvet and Sosandar if it is to remain competitive against Next.”