Investment Column: N Brown fall not as bad as it seems
the investment column
Thursday 09 October 1997
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.
- 1 Cyclist in Russia narrowly misses being hit by car and lorry
- 2 'F*ck it, I quit': KTVA reporter Charlo Greene quits live on air in spectacular fashion
- 3 What are your fingerprint words?
- 4 Gary Lineker involved in Twitter row after presenter rubbishes claims he will be warned by BBC over foul-mouthed tweets
- 5 Pink Floyd new album: Band unveil cover art for first record in 20 years
Scotland could still declare independence – even without referendum, says Alex Salmond
Scottish referendum results: Cross-party consensus collapses amid Tory-Labour spat on the 'English question'
Hilary Mantel 'should be investigated by police' over Margaret Thatcher assassination story, says Lord Bell
Plebgate MP Andrew Mitchell called officer a 'little s**t', claim court documents 'exposing ex-Chief Whip's 'record of abusing police'
Archbishop of Canterbury admits doubts about existence of God
Labour Party conference: Ed Balls to set out plan to freeze child benefit to balance books
iJobs Money & Business
£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...
£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...
£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...
£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...