The fashion retailer, whose brands include JD Williams, Simply Be, Ambrose Wilson and Jacamo, has moved most of its business online with digital sales now accounting for 83% of total revenue.
The strategy is in response to a consumer shift towards online shopping, a trend that has hurt many high street retailers.
Digital sales up but total revenue down
In the 13 weeks to 1 June 2019, N Brown’s fiscal first quarter, total digital revenue increased 3.0% with JD Williams sales up 5.9%, Simply Be sales up 4.6%, Ambrose Wilson sales up 10.1% and Jacamo up 8.8%.
Revenue from the financial services business increased 8.0%, supported by growth in the loan book.
However, product brands revenue dropped 12.7% due to the impact of scaling back offline marketing spend and recruitment.
Total product revenue, which excludes stores and US, fell 5.4%.
The decline in product revenue was led by a 16.2% decrease in Ambrose Wilson total sales.
“In line with our strategy, we delivered digital revenue growth across JD Williams, Simply Be, Ambrose Wilson and Jacamo as we continue to improve our customer offer whilst managing the decline of our legacy offline business,” said chief executive Steve Johnson.
“The retail market remains challenging, but we have a clear strategy to deliver profitable digital growth and our full year expectations are unchanged."
For the 2020 financial year, N Brown continues to expect the product margin and financial services margin to both decline as much as 100 basis points.
Group operating costs are forecast to decrease by 2.5% to 4.5% while capital expenditure is estimated to among to £35mln to £40mln.
Net debt will fall between the range of £440mln to £460mln for the year.
Peel Hunt keeps 'buy' recommendation
Peel Hunt maintained a 'buy' rating and target price of 200p.
"Earnings momentum has stabilised thanks to strong cost efficiency, particularly from the digitalisation of marketing spend. N Brown is the leading specialist in its market," the broker said.
"Currently, we believe N Brown should be trading on a modest sector discount.
"Greater visibility on marketing key performance indicators, such as cost of acquisition, frequency and basket, will drive greater understanding of the business, in our view, and unlock the potential for a higher rating."
In morning trading, shares rose 2.2% to 134p.