Fashion retailer N Brown Group PLC (LON:BWNG) said sales fell over the key Christmas trading period, led by a decline in its legacy offline business.
In the 18 weeks to January 5, the group’s fiscal third quarter, group sales dropped 1.6% as weaker product sales from stores offset growth in its financial services arm and online sales.
The company said product sales fell 6.0% as it continued to scale back marketing spend on its offline business while financial services revenue gained 9.7% on the back of increased interest charges.
Power brands and online sales lead the way
The group’s so-called power brands, including JD Williams, Simply Be and Jacamo, continued to outperform the rest of the business with a 0.1% increase in product sales and a 6.4% rise in online sales.
Simply Be and Jacamo saw product revenue rise by 1.6% and 5.5%, respectively, but JD Williams product sales decreased 3.3% due to the impact of the migration of its Fifty Plus brands.
READ: N Brown slumps as tough retail market and offline business weigh on revenue
Online sales of Simply Be, Jacamo and JD Williams gained 5.9%, 6.8% and 4.2%, respectively.
N Brown said digital sales now account for 78.5% of product revenue, compared to 71% the same period a year ago, as part of its strategy to move its business online.
“We continue to manage the anticipated decline of our legacy offline business and remain focused on improving our customer proposition to drive profitable online growth,” said chief executive Steve Johnson.
“Trading over the Cyber and Christmas periods was relatively consistent and in line with our expectations, with the group benefiting from a more targeted and efficient approach to its promotional activity.”
Maintained margin guidance, cost forecasts revised
For the 2019 financial year, the group continues to expect product gross margin to fall by up to 100bps amid a heavily promotional retail market. The financial services gross margin is forecast to drop 100bps to 200bps.
It revised its expectations for operating costs to fall between 2% and 4%, compared to an earlier estimate for a 1% to 3% decline. Exceptional costs, however, are now expected to rise above the previous guidance of £67mln due to an impairment on the group’s VAT debtor asset, which will be determined at year-end.
All other guidance for the year remains unchanged.
"Based on maintained margin guidance, continued strong financial services performance and improved operating efficiency, our full year expectations remain unchanged,” said Johnson.
Shares fell 3.8% to 97p in morning trading.