N Brown Group – transitioning from traditional to digital retailing

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N Brown Group – transitioning from traditional to digital retailing

Transformation at retailer N Brown could eventually spell good news for shareholders, observes Mark Watson-Mitchell. 

The last two financial years have seen the Manchester-based retailer N Brown Group (LON:BWNG) put itself through a fundamental restructuring process.

It is an ongoing battle, there will be ups and downs along the way and, obviously, Covid-19 was one of them.

However, I do see this group coming out the other side having grasped the digital age to the betterment of its shareholders.

Having followed this group for decades, I am pleased to see that it is getting up with the times.

During its restructuring the group has identified its various weak contributors, and it has now defined where its growth can be centred and is accelerating its work.

It has decided that it needed distinct brands to attract a broader range of customers.

Clearer brands with more focused propositions is its strategy going forward.

There will be four apparel brands and a standalone home brand. They know their target markets and they have very definite customer segments.

Simply Be is an online fashion and beauty brand targeting plus size women aged 25-45; Jacamo is an online fashion and grooming brand targeting plus size men aged 25-50; JD Williams is an online boutique showcasing fashion and home product for women aged 45-65; Ambrose Wilson is a womenswear fashion-led brand for the mature 65+ female customer; and Home Essentials is the group’s standalone one-stop home brand focused on modern homeware, targeting families with children at home.

We have all seen adverts, in the press, television or other media for all those distinct brands, and now they are set on attracting a broader range of customers.

To do just that the group is enhancing its digital experience to increase customer conversion. It will look to improve its products to drive customer frequency.

The new ‘Home’ offering will be for customers shopping across more categories.

And added to all that the group will continue to offer flexible credit to help its customers shop.

This overall strategy is aimed at returning the N Brown Group to growth again.

Estimates for the current year, hit by further restructuring and digital enhancement costs, suggest that revenues could fall to £715m, with pre-tax profits coming out at around £33.5m, worth 9p in earnings per share.

For the year to end-February 2022 sales could rise to £768m and profits of £45m, giving 12.5p per share in earnings.

Whether those broker estimates come to pass or not will be very much the ongoing question this year.

There are 285m shares in issue, of which David Alliance owns 33% and Nigel Alliance holds 11%.

Professional investors include Coutts & Co (10.4%), UBS (9.3%), Invesco (5.5%), Aberforth (4.7%), Threadneedle Asset (3.4%), Hargreaves Lansdown Stockbrokers (3.1%), Banque Lombard Odier (2.9%) and DWS Investment (2.8%).

The market capitalisation is only £103m, while its current year turnover is projected seven times its valuation. Its net debt is now down to four times its value figure.

Analyst Andrew Wade at brokers Jefferies International is looking for 120p a share in due course.

The shares have been as high as 164p in the last year and traded at just 10p at their lowest at the end of March. Today they are looking healthier at 36.15p.

Until we have more news from the group I set my target price at a lowly 50p.


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