Jun 6, 2023
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Simply Be owner N Brown struggles in tough environment

Jun 6, 2023

Struggling e-tailer N Brown will have been hoping that better results in the fourth quarter could boost its full-year numbers after Q3 had seen revenues falling in the face of the cost-of-living crisis.

Simply Be

So did the annual results on Tuesday hold out any hope to the management team at the owner of Simply Be, JD Williams and Jacamo? Not really, as revenue fell and losses grew.

CEO Steve Johnson had earlier said that with the tough FY23, the new financial year would start with fewer active customers and in October had issued a profit warning, although its January update saw him saying that the firm could meet analysts’ consensus profit forecast of £57.5 million. As it happened, adjusted EBITDA came in at almost that figure, hitting £57.3 million.

It was no surprise that the results didn’t exactly make for happy reading. But the firm’s shares still fell over 12% despite the numbers not coming as a shock.

So what were the rest of the figures for the 53 weeks to 4 March?

Group revenue fell 5.3% to £677.5 million, despite the comparison period having been only 52 weeks.

Within that, product revenue was down 6.9% at £433.4 million, while financial services revenue fell only 2.4% to £244.1 million. We've already mentioned the adjusted EBITDA figure, which was down 39.7% this time. The adjusted EBITDA margin dropped from 13.3% to 8.5%.

Adjusted pre-tax profit dropped a massive 82.6% to £7.5 million and the statutory loss before tax was £71.1 million, down from a profit of £19.2 million a year earlier. Adjusted net debt also widened from £259.4 million a year ago to £297.4 million this time.

Apart from the fact that it was all in line with expectations, it wasn't exactly good news. The company blamed the challenging online market conditions, and said that as well as its products revenue falling 6.9% – or 8.4% on a direct 52-week comparison – its strategic brands were down 5.3% in line with the broader online non-food market.

It added that returns rates, and the clothing and home mix had returned to pre-pandemic norms by H2 FY23.

But at least the product margin rate continued to improve, up 1.8ppts, benefiting from reduced promotional levels and measured price increases.

The company said it was a year of “strategic and operational progress” including the launch of its new mobile-first website for Simply Be, a strengthened board, progress against ESG priorities, and a step-up in investment in FY24. Its priorities for the year ahead include new websites for Jacamo and JD Williams.

And talking of the current financial year, the softness seen in Q4 FY23 (with revenue down 17.8% year-on-year) “has broadly continued into Q1 FY24”, which is disappointing after a strong Q1 FY23.

N Brown sees ongoing challenges ahead such as the high inflationary environment and low consumer confidence for the rest of this year. So expectations are that full-year product revenue will decline “at a slightly improved rate to that seen in FY23” (-8.4% on a 52-week basis).

Back with last year, the company said it rebalanced its product mix towards Clothing and Footwear (C&F), which saw better category market performance than Home & Gift, while achieving increases in Average Item Value of 12%. 

It also successfully launched own-brand labels and collaborations including its William Hunt and Jacamo formalwear, complemented by third-party new range additions including Whistles, Sosandar and Ted Baker

Steve Johnson said of all this: “We have remained adaptable to the trading environment which became more challenging during the year, as inflation impacted both our customers and our cost base. Although volumes softened, we maintained a disciplined approach to trading, with a particular focus on upholding margin despite a promotional backdrop.

“We are expecting the weaker consumer confidence to continue weighing on our performance before we see a return to growth and are therefore keeping a tight control of costs. 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.”

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