N Brown Group has booked what it says was a “good performance” in a challenging market during its third-quarter as the online, catalogue and stores retailer revealed plans to expand its online presence through a new partnership with German fashion e-tailer Zalando.
For the 18 weeks to 16 January, N Brown said it its full-year profit expectations remain unchanged as group revenues climbed 3.2% and product revenue increased by 2.7%.
The company reported 9% online sales growth, with penetration now at 74%, up four percentage points year-on-year.
Building on its online capabilities and existing third-party trading partnerships, N Brown revealed it is to partner with Berlin-based e-tailer Zalando for two of its Power Brands – Simply Be and Jacamo.
Capsule collections from both brands will be available across all 15 countries that Zalando operates in, offering exposure to Zalando’s more than 22m active customers.
Zalando is featuring a capsule collection from Jacamo of initially 40 lines, from size 2XL to 5XL, which launched last month, while Simply Be will initially have 50 lines, from size 16 to 24, and will launch in spring/summer of this year.
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By GlobalDataSimply Be was the standout brand during the third quarter with a 14.5% revenue hike, which helped push Power Brand sales (JD Williams, Simply Be and Jacamo) up 7.3%. JD Williams and Jacamo also booked revenue increases, at 3% and 4.6% respectively. Secondary brands revenue was down 8.4%.
Meanwhile, the retailer hailed the relaunch of JD Williams a success, with new customers up 12%, but admitted the decision for its Fifty Plus brand customers to receive the JD Williams marketing programme had “mixed success” due to the more traditional fashion preferences of some of these customers.
N Brown said this impacted overall active customer metrics and ladieswear performance but added actions are being taken to address this of which it is confident that response rates from this customer group will improve going forward.
At category level, footwear and accessories recorded the strongest growth, up 9.6%, while ladieswear and menswear trailed with sales growth of 0.7% and 4.1% respectively.
CEO Angela Spindler said she is pleased with the trading performance during the period and hailed “another record-breaking Christmas”.
She added: “We are confident in achieving our overall profit expectations. These remain unchanged, although we expect the shape of our results to be different than previously anticipated, as reflected in our revised guidance.”
Looking ahead, while the retailer said its full-year profit expectations remain unchanged, it now expects product gross margin to be down between 225-250 basis points, compared with its previous guidance of 70-120 basis points due to higher promotional activity.
Shares in the company were down 16% on the news today (23 January).
Sofie Willmott, senior retail analyst at GlobalData, notes that while N Brown outperformed the total UK clothing and footwear market, it is disappointing the company did not perform better considering the dominance of its website and the overall online channel’s outperformance over the festive period.
“Womenswear, in particular, was hard hit with total revenue only marginally beating the year by 0.7% as N Brown tried to encourage the customer base of its secondary brands like Fifty Plus to move over to the power brands like JD Williams by targeting them with the same marketing program,” Willmott said. “Seemingly one size does not fit all and the retailer must ensure a more tailored approach is used to coax customers across, highlighting the most relevant product ranges through purchase history and personalisation as well as using familiar formats of communication.”
In order to remain competitive, N Brown’s discounting over the period “severely” impacted margins, said Willmott, who added it is unsurprising that the retailer feels compelled to participate in promotions in an attempt to capture its share of squeezed shopper budgets. “However discounts must be controlled so the brands are not devalued and to ensure customer willingness to still buy at full price,” she notes. “This will also help to protect margins that have already been impacted by rising cost prices.”
Meanwhile, in light of its Zalando partnership, Willmott says N Brown must ensure brand credibility remains intact through investing in product and experience, since the level of competition will further intensify over 2018 as more players, particularly those targeting the 45+s, resort to discounting to stimulate spend.
