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March 3, 2022

N Brown “not immune” to supply chain headwinds

N Brown Group says consumer demand for clothing is normalising amid the end of Covid-19 restrictions, but CEO Steve Johnson notes the UK digital clothing retailer is "not immune" to supply chain and inflationary cost pressures being seen across the wider market.

By Beth Wright

In a trading update covering the 52 weeks to 26 February, N Brown boss Johnson says the company continues to take proactive actions to offset the supply chain and inflationary headwinds and mitigate the impact on its FY23 performance.

His comments come as the group says it closed the year with “pleasing growth” in product revenue from its strategic brands which, subject to audit, has increased about 9% versus the prior-year period.

It adds total active customers are now in year-on-year growth closing about 3% up at 2.9m. For the year, N Brown expects to report all financial metrics in line with the guidance provided on 20 January, including adjusted EBITDA between GBP93m-GBP96m.  

Looking to FY23, the group says as a result of the “escalating and fast-moving inflationary environment”, it currently anticipates adjusted EBITDA will be similar to the level reported in FY21, before growing again as the macroeconomic headwinds recede and its strategy is executed.

“We enter FY23 with confidence in generating revenue growth from our strategic brands.  Within other brands, the managed decline in revenues experienced in recent years will moderate significantly as we no longer cycle against the drag from the Figleaves website closure,” N Brown says.

“Retail customer demand is normalising as we exit Covid-19 pandemic restrictions, with clothing driving demand and customers moving back into categories such as dresses and formalwear. The softer conditions in the online home market, as previously reported, are assumed to continue. Our customer offering will continue to improve in both clothing and home throughout FY23.”

It adds proactive actions taken by management largely mitigated the operational impact of the global supply chain challenges during FY22, although a net drag to margin was experienced due to higher freight rates. Freight rates had been expected to moderate but are now assumed to continue at an elevated level for FY23, it notes.

The company also expects inflationary headwinds to affect its wider cost base but says management actions are planned across all areas to mitigate the effect of these pressures. It expects a net increase in the cost to sales ratio in FY23 inclusive of continuing our strategic investments in areas such as brand marketing.

Meanwhile, product gross margin is expected to improve driven by the group’s planned pricing response to cost inflation, the movement of the product mix back into clothing, and continued initiatives including advancing data usage to optimise pricing strategies.

“I am pleased with the progress which we continue to make and despite the volatile backdrop our expected full-year numbers remain in line with previous guidance. It’s encouraging to see full-year customer numbers return to growth and to be closing the year with a strong balance sheet. We enter the new financial year with continued confidence in our proposition,” Johnson says.

“We are not immune to the supply chain and inflationary cost pressures being seen across the wider market, however, we continue to take proactive actions to offset these and mitigate the impact on our FY23 performance.”

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