N Brown chief executive Angela Spindler said the business expects profit to return to growth within the next financial year, after warning that its full year 2014-15 pre-tax profit is likely to be “slightly below” market expectations of £88m.
The home shopping retailer blamed an extended clearance period following the warm autumn, strategic changes to its pricing structure in the fourth quarter and the closure of catalogue and online womenswear business Gray & Osbourn for the decline in revenues and profit.
Spindler told Drapers: “We’ve just agreed the budget for this year we expect to return to profit growth in the next financial year. I’m a little disappointed we slightly missed [the profit forecast], but it was a consequence of clearing stock after a very tough autumn season in fashion.”
N Brown had already adjusted its guidance down to between £88m and £92m in October 2014, following a decline in first-half revenues.
Pricing had a big impact on the business during the quarter, with a longer Sales clearance period than expected accounting for “half of the profit miss”, according to Spindler.
“Our Sale was strong and we marked down to clear,” she explained. “We continued it through January and February as we wanted to exit the season clear.”
The business also launched a strategic change in pricing at JD Williams at the start of January with its ‘all sizes one price’ scheme. Spindler said the planned investment in the strategy was central to the further growth of the business.
“In a catalogue prices differ depending on size, but that doesn’t translate well in a digital world. We changed that at the start of the season and the customer response has told us it was the right thing to do, as product volumes returned to double digit growth for the first time in many years, so we will continue with it next year.”
Sales were up 3.6% for the 13 weeks to February 28, however full year revenues are likely to be flat year on year.
As previously reported by Drapers, N Brown will discontinue catalogue and online womenswear business Gray & Osbourn from June. This will result in exceptional costs of between £11m to £13m in 2014-15.