Jul 6, 2010
N Brown sales hit by shoppers' post-election blues
Jul 6, 2010
LONDON, July 6 (Reuters) - British home shopping group N Brown (BWNG.L) said sales growth slowed after the general election as shoppers held back on spending while they assessed the likely impact on their finances of the coalition government.
The Manchester, northern England-based firm, which targets older and larger customers with clothing brands such as Simply Be, Oxendales, Marisota and Jacamo, said on Tuesday like-for-like sales increased 0.1 percent in the 18 weeks to July 3.
That compares with a rise of 3.1 percent in the eight weeks to April 24, implying like-for-like sales fell about 2.3 percent in the latter 10 weeks.
Chief Executive Alan White said since the British public went to the polls on May 6 trading had been subdued as customers fretted over what tax rises and spending cuts the new Conservative-Liberal administration would introduce in its June 22 emergency budget to cut a record public deficit.
"Our customers, with an average age of 57, tend to be more cautious when there's bad news around," he told Reuters.
Last week a survey from GfK NOP said British consumer confidence fell for the fourth month in a row in June, while on Monday a survey from Markit/CIPS said the services sector grew last month at its slowest rate for 10 months, increasing fears of a double dip recession.
White, a graduate in law from Warwick University in 1976, is optimistic trading will improve.
"I'd like to think that now we've got the emergency budget out of the way -- and a lot of people have felt it wasn't quite as bad as they feared -- that we will see things improving."
With second-half comparative sales numbers easier than those for the first-half he predicted a rising sales trend through the balance of N Brown's year to end-Feb. 2011 and said he was comfortable with analyst forecasts of 97-98 million pounds ($146.4-$147.9 million), up from 93 million pounds in 2009-2010.
He noted some measures in the budget would assist N Brown's customer base, such as minimum annual increases of 2.5 percent in old age pensions and increased personal allowances for the low paid, while the planned rise in VAT (sales tax) on Jan. 4 would bring forward sales for big ticket items.
Prior to Tuesday's update shares in N Brown had increased 16 percent over the last three months, outperforming a 10 percent fall in the UK general retailers index .FTASX5370.
The stock was down 4.2 percent at 243.9 pence at 0854 GMT, valuing the business at 677 million pounds.
"These figures are a little disappointing and the outlook for the company's core customer is expected to remain subdued," said Freddie George, analyst at Seymour Pierce.
But he said he was still positive on the shares, based on growth prospects in Germany and the United States, growing sales over the Internet, and the development potential of acquired brands High and Mighty and Figleaves.
Despite the slowdown in underlying sales, N Brown said it was continuing to win market share with total revenue up 1.1 percent over the 18 weeks, while gross margin was down 0.2 percent, better than guidance of down 0.3 percent, helped by less discounting and measures to reduce bad debt.
(Editing by Mark Potter, Mike Nesbit) ($1=.6624 pounds)
© Thomson Reuters 2022 All rights reserved.