N Brown warns of ‘very challenging’ conditions as profit plunges

N Brown, the owner of fashion retailers Simply Be and JD Williams, has warned of a “very challenging” few months ahead as it revealed that its pre-tax profit plunged by more than 80% last year.

Shares in N Brown Group, which also owns men’s brand Jacamo, slumped after it said inflation had taken its toll on the business and weighed on consumer spending.

It reported a pre-tax profit of £7.5 million in the year to the beginning of March, down 83% from the £43.1 million reported the same time last year.

It also saw product revenues contract by nearly 7% over the period to £433.4 million. Its share price was down by nearly 15% on Tuesday morning.

Cost-of-living pressures eating into household disposable incomes and a £15 million cost inflation hit have contributed to a more challenging retail environment, the company said.

The dip in sales came despite the retailer increasing its prices and reducing the number of items on sale – with the cost of the average item jumping by 12%.

Looking ahead, N Brown warned that conditions are likely to get worse before they get better.

The company said: “We anticipate market conditions to remain difficult for the next 12 to 18 months and expect the first half of the 2024 financial year to be particularly challenging, before inflationary pressures slowly subside and the impacts of UK economic policy flow through into consumer markets.”

It said it has already started the new financial year with fewer active customers, and that demand for its summer ranges has been hit by poor early spring weather.

Staff have also been affected, with the firm revealing it had made redundancies across its workforce of around 1,800 people in the UK after seeing revenues fall.

It did not specify how many roles were shed but said it incurred redundancy costs of £2.4 million during the year.

The retailer, which says it champions inclusive fashion for all body shapes, said it is keeping a tight control on costs while weaker consumer demand continues to weigh on its performance.

CEO Steve Johnson said: “We remain confident in our strategy and are more focused than ever on the transformational priorities which will deliver the biggest benefits, including new websites for Jacamo and JD Williams, and the delivery of our new financial services platform.”

The financial services platform means customers can spread the cost of shopping through credit.

There was a two percentage point rise in the proportion of customers signing up for credit options over the latest year, N Brown said.

The group said it expects its product revenues to decline by 8.4% over the next financial year.