Mail strike delivers blow to N Brown

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The Independent Online

The pre-Christmas postal strike caused havoc for N Brown, the catalogue group popular with the larger woman, which yesterday issued a profit warning.

The Royal Mail's industrial action, which particularly hit homes in and around London, meant the company could not mail its flyers out to customers during its peak trading period. It also caused a brief cash-flow crisis because customers were unable to pay off their outstanding balances by post.

N Brown, home to the Ambrose Wilson and Simply Be catalogues, warned that the results for its current year would be below market expectations. Its shares initially dived 9.25p on the news but later recovered to close just 0.25p down at 121p.

The company said its core mail order sales rose 3.2 per cent, bucking the market's downward trend, after it stepped up its promotional mail-shots. But this came at the expense of gross margins, which slid by 2.1 percentage points in the second half against the previous year.

Richard Ratner, an analyst at Seymour Pierce, said: "Whilst the sales growth is good news, the story on margins is not, especially as [rival] Findel, which was slightly disrupted by the Post Office problem, did not have to resort to increased discounting,'' He slashed his forecast for N Brown's pre-tax profit to £50.5m from £54m and also nudged next year's target 4 per cent lower.

To reduce the risk of bad debts, the company has cut some customer credit limits and tightened the availability of interest-free credit.

One ray of light was that the group recruited 5 per cent more new customers than during the previous period. Although this dealt a further blow to its margins, the company is confident the move will pay off when they receive its spring/summer catalogue.

Alan White, the chief executive, said: "Looking ahead, we are starting to see some encouraging signs from our spring/summer catalogues and the continuation of this will be pivotal to our progress in the next financial year."

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