Investment Column: N Brown fall not as bad as it seems

the investment column

N Brown, the Manchester-based mail order group, has been one of the most reliable performers in the retail sector over the past few years.

So it was surprising to see the shares dip yesterday on news of a fall in operating margins in the first half.

Though that ratio slipped to 12.8 per cent compared to 13.4 per cent in the first half last year, the news was not nearly as bad as first appeared.

Though the 12.4 per cent increase in first-half profits to pounds 18m did not match the 19 per cent sales increase, the reasons were more about investing in future growth than short-term problems.

Net margins were affected by a significant and planned increase in the number of new customers attracted to the group's raft of catalogues.

New customers are loss-making for the group in the first year as their spend is low compared to more seasoned shoppers. They only start to become profitable in years two or three, so seeds sown now will be reaped in 1998-99.

Second, the company now fulfils around 30 per cent of its deliveries via its own couriers, which gives it greater control, but has come at a cost of pounds 500,000.

Like-for-like group sales rose by an impressive 19 per cent on last year. Current trading since the end of the half has not been so good, but that includes a flat two weeks as a result of the shopper apathy which followed the death of Diana, Princess of Wales.

Other mail order groups are understood to have experienced the same. N Brown's sales have recovered in the three weeks since the death.

Jim Martin, N Brown's chief executive, is continuing his strategy of recruiting more shoppers in the 30 to 40-year age range to the catalogues whose core constituency has historically been the over 50s.

The younger group now accounts for 19 per cent of group sales, 29 per cent ahead on last year. The company is also investing pounds 20m this year on warehouse expansion and computer upgrades.

No acquisitions are on the horizon, the company says, though a return to the Freemans deal is always possible if the competition authorities block Littlewoods' purchase from Sears.

On full-year forecasts of pounds 42m the shares, down 5p to 412.5p yesterday, trade on a forward ratio of 21 times.

That is a 20 per cent premium to the market, but given the shares were rated at a 40 per cent premium a year ago, they are starting to look good value.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

competitive: SThree: Are you passionate about sales?Do you have a keen interes...

Recruitment Genius: Loan Adviser - OTE £30,000

£17000 - £30000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

Day In a Page

Greece debt crisis: EU 'family' needs to forgive rather than punish an impoverished state

EU 'family' needs to forgive rather than punish an impoverished state

An outbreak of malaria in Greece four years ago helps us understand the crisis, says Robert Fisk
Gaza, a year on from Operation Protective Edge: The traumatised kibbutz on Israel's front line, still recovering from last summer's war with Hamas

Gaza, a year on from Operation Protective Edge

The traumatised kibbutz on Israel's front line, still recovering from last summer's war with Hamas
How to survive electrical storms: What are the chances of being hit by lightning?

Heavy weather

What are the chances of being hit by lightning?
World Bodypainting Festival 2015: Bizarre and brilliant photos celebrate 'the body as art'

World Bodypainting Festival 2015

Bizarre and brilliant photos celebrate 'the body as art'
alt-j: A private jet, a Mercury Prize and Latitude headliners

Don't call us nerds

Craig Mclean meets alt-j - the math-folk act who are flying high
How to find gold: The Californian badlands, digging out crevasses and sifting sludge

How to find gold

Steve Boggan finds himself in the Californian badlands, digging out crevasses and sifting sludge
Singing accents: From Herman's Hermits and David Bowie to Alesha Dixon

Not born in the USA

Lay off Alesha Dixon: songs sound better in US accents, even our national anthem
10 best balsamic vinegars

10 best balsamic vinegars

Drizzle it over salad, enjoy it with ciabatta, marinate vegetables, or use it to add depth to a sauce - this versatile staple is a cook's best friend
Greece says 'No': A night of huge celebrations in Athens as voters decisively back Tsipras and his anti-austerity stance in historic referendum

Greece referendum

Greeks say 'No' to austerity and plunge Europe into crisis
Ten years after the 7/7 terror attacks, is Britain an altered state?

7/7 bombings anniversary

Ten years after the terror attacks, is Britain an altered state?
Beautiful evening dresses are some of the loveliest Donatella has created

Versace haute couture review

Beautiful evening dresses are some of the loveliest Donatella has ever created
No hope and no jobs, so Gaza's young risk their lives, climb the fence and run for it

No hope and no jobs in Gaza

So the young risk their lives and run for it
Fashion apps: Retailers roll together shopping and social networking for mobile customers

Fashion apps

Retailers roll together shopping and social networking for mobile customers
The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'