N Brown surprised the market this morning with news that chief executive Alan White and chairman Lord Alliance will leave the home shopping group. The announcement coincided with the company reporting a 1.9% rise in like-for-like sales in the 17 weeks to June 30. Total sales increased 2.5%.

“With half the board retiring, including the chief executive and the group’s biggest shareholders (45% combined), this will spark immediate speculation about a possible sale of the group which should significantly outweigh a small downgrade this morning given the attractive valuation.” - Matthew McEachran, Singer Capital Markets

“Trading news has been outweighed by a sway of executive and non-executive director retirements. A welcome increase in rate of like-for-like sales from 0.6% to 1.9%is offset by weaker gross margin, which will see us trim our forecasts. The Alliances are standing down from the board, but set to remain major shareholders, although this may prompt speculation on their substantial stake.” - David Jeary, Investec Securities

“Implied like-for-like run rate is stronger than we had expected given the mixed weather, although as with Debenhams last week, this represents a mix shift away from ladieswear…While the retirement of Lord Alliance is not a surprise, we did not expect chief executive Alan White to be retiring quite so quickly (although the chairman change has arguably been the catalyst for Alan to leave as he had been intending to retire in the next 18-24 months). The combination of new chairman and chief executive may have the potential to drive a more aggressive growth strategy, we believe.” - John Stevenson, Peel Hunt

“May was clearly very strong but June returned to much more becalmed levels as the rains returned. Debenhams suggested that womenswear sales have been very poor and N Brown concurs: the mix effect of selling fewer ladies summer dresses took 50bps off the expected gross margin. Customers have also been trading down, focussing strongly on value lines and promotions.

This has taken a further 50bps off the gross margin, leaving it down by at least 200bps so far in the year. Management is sticking with its view that in gross margin terms it will finish first half well, and that it will be up strongly in second half. We’ve never believed that this would be the case: the mooted 4% cuts in prices will not, in our view, be enough to avoid discounting and this is at the heart of our position at the foot of the range. Andrew Higginson will be more than a safe pair of hands as Lord Alliance’s replacement. Of greater alarm is the departure of chief executive Alan White, to take on a portfolio of non-executive roles…we still question why Mr White has decided to leave, if, as has been suggested, the US venture was gathering pace. Is this quite the growth vehicle we thought it was?” - Jonathan Pritchard, Oriel Securities

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