N Brown Group has said it expects profits for the full year to be lower than expected as a result of a highly promotional market, lower financial services revenue and a lower than expected benefit from the IFRS9 non-cash provision estimate.
The retailer said it expects adjusted profit before tax for the 2019/20 financial year to be in the range of £70m to £72m, down from forecasts of £78m to £84.1m.
In the 18 weeks to 4 January, total revenue fell 5% year on year. Product revenue was down 4% and financial services revenue fell 4.6%, but digital revenue was up 2.5%, driven by strong growth at Simply Be and Ambrose Wilson.
A total of 87% of product revenue is now digital, an increase of five percentage points.
Steve Johnson, CEO, said: “This has been an encouraging period of peak trading for the business in a highly promotional market, as we delivered digital revenue growth across both womenswear and menswear with particularly strong digital growth from Simply Be and Ambrose Wilson as customers responded well to our ranges. Financial services revenue was down, reflective of our strategic approach to the retail business and continued tightening of our lending criteria.
“We are making good progress with our ongoing strategic review and look forward to providing further details at our full-year results in April. Our work so far has highlighted the need to have a tighter brand portfolio, a sharper focus on product and a cost base appropriate for delivering sustainable digital growth. At the same time, we will continue to proactively address the accelerating and cumulative external factors which are anticipated to reduce the size of our financial services business over the next two years. These will significantly influence the way we will operate our financial services business and we are taking proactive measures to ensure that the change is managed appropriately. This is in line with our strategy of becoming a digitally focused, retail-led business.
“Our expectations remain that the retail market will continue to be challenging and promotional, but we are focused on our clear strategy of delivering profitable digital growth.”