Home shopping retailer N Brown Group has warned its 2014-15 annual pre-tax profit is likely to be “slightly below” market expectations of £88m, after the challenging autumn and one-off costs incurred by the closure of Gray & Osbourn hit its bottom line.
N Brown had already adjusted its guidance down to between £88m and £92m in October 2014, following a decline in first-half revenues.
In its update for the 13 weeks to February 28, it said trading momentum was “recovering well”, with sales up 3.6% in the fourth quarter. However, its full-year revenues are lower than expected and flat year on year.
Full-year percentage gross margin is in line with expectations. However, product gross margin was hit by the need for clearance activity to get rid of unsold stock following the unseasonably warm autumn in 2014, as well as strategic changes to the pricing of its fashion brands during the fourth quarter.
N Brown said its move to a new ‘first price right price’ and an ‘all sizes one price’ strategy during the period was well received and drove sales volume, and it will continue with this strategy.
As previously reported by Drapers, N Brown will discontinue catalogue and online womenswear business Gray & Osbourn from this June, following a strategic review. Today, N Brown said this was likely to result in exceptional costs of between £11m to £13m.
The full-year results for 2014-15 will be released on April 29.
Chief executive Angela Spindler said: “We are very encouraged by the momentum seen during Q4, both in terms of trading and strategic progress. Combined with our continued product improvements, during the period we decided to invest more in price; this proved successful, with product volumes returning to double-digit positive growth for the first time in many years.
“We have also accelerated our strategic transformation programme and commenced a major extension of our warehouse to support our future growth. The transformation we are driving is fundamental and necessary for future long-term sustainable growth.
“Whilst we are disappointed by the slower than anticipated progress from a profit perspective, this is because we are taking the right decisions now – in some areas earlier than anticipated by our previous profit guidance – in order to build a better business for an online world.”
N Brown said it expects its full-year gross margin in 2015-16 to remain flat at 100 basis points.