Key Numbers

Revenue flat at £818m and PBT down 13.4% to £86m. Online sales to 59% of total, active customer base up 2.4%. Gross margin down 60bps to 52% and operating margin of 150bps to 11.5%. JD Williams sales down 2.7%, Simply Be up 1.4% and Jacamo up 11.1%.

Analysis

N Brown are one of the most frustrating retail companies to analyze. Every quarter the goal posts change and we learn how the latest set of weak results were due to some previously unannounced strategic change. Some of these moves have actually been good but management are just not to be trusted here.

The poor full year results were already revealed by the poor Q4 trading statement released mid-way through last month. We get a slightly greater level of detail here and it just keeps looking worse. Typically for the company, shares are up on this dire performance.

Introduction

It is difficult to know where to start. My understanding is that the current strategy revolved around turning around JD Williams through greater marketing investment. The strategy then seemed to change when this didn't play out and the company moved into "price investment" mode in the last part of the year and cut back on marketing. It looks like the emphasis has now changed to "digital-first", I am not entirely sure what this means as N Brown have started opening stores...best not to think about this too much though...it just doesn't make sense.

Sales performance

Clearly, these results are hugely disappointing. Jacamo performed well but nothing else did. In particular, I want to point out the anonymous Support Brands line turned in a particularly poor performance. This line is equal to JD Williams but I have no idea what this includes. Either way, the marketing investment strategy has clearly fallen short.

The much ballyhooed relaunch of JD Williams is the most important failure. Interestingly, the explanation for this failure has changed once again. In the Q3 update that announced poor response to the marketing investment, we did hear that weather was poor but this wasn't linked to JD Williams. Now, management appear to be directly linking the poor weather to underperformance at JD Williams. I don't get this. The old line was that the marketing campaign actually had worked but sales wouldn't pick up until next year. I really don't which story to believe. However, the point stands that I don't believe JD Williams will pick up this year and…

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