Opinion: N Brown share price rests on transformation

The plus-size fashion business has pivoted over the past few years to become a digital-first operator and face head on retail’s multichannel environment.

But there is an argument that the company hasn’t transformed quickly enough to date amid the rapid pace of change sweeping across the industry.

Indeed, that thinking may have been front of mind when N Brown’s board opted to part company with chief executive Angela Spindler in mid-September.

Chairman Matt Davies said at the time: “We recognise that now is an appropriate time to search for a new leader who can take the business forward through the next phase of its development.”

“Whether its product proposition, customer service and brand positioning have moved on enough to satisfy increasingly demanding consumers remains a matter of debate”

It was a statement that summed up the increasing drive by retailers to install a ‘new breed’ of leader to steer them through digital transformation – etailer boohoo’s appointment of John Lyttle as chief executive is perhaps the exception that proves the rule. 

Spindler, who began her career in marketing with Coca-Cola UK before taking on senior roles at Asda and Debenhams, was ultimately not seen as that person, despite the good work she oversaw.

The City will appreciate, as Davies pointed out, that Spindler dealt with “significant legacy issues and a challenging retail backdrop” during her time in charge.

But whether its product proposition, customer service and brand positioning have moved on enough to satisfy increasingly demanding consumers, particularly in the age of Amazon, Asos and Boohoo, remains a matter of debate.

Clarity needed

It will only have an interim boss in the shape of Steve Johnson – the chief executive of its financial services business – at the time of its results on Thursday next week, but analysts and investors will expect some clarity on the direction and pace of travel being targeted in the post-Spindler era.

N Brown’s share price has fallen dramatically in the past 12 months, shedding almost two-thirds of its value. Monday’s opening price of 136p – down from 352.4p a year ago – left its market cap at around the £380m mark.

“Closing all 20 of its stores as a result of weak footfall is a move that makes commercial sense, despite the associated pain of 270 job losses”

That wasn’t helped by a slump in profits last year, when the bottom line was hampered by a hefty £40m compensation payment to customers over flawed insurance products. Adjusted pre-tax profit fell 6.5% to £82.6m as a result. Analysts’ consensus suggests that will only inch up slightly in 2018/19 to £82.8m.

Some plans are already in place to get that moving in the right direction, towards the £92.6m pre-tax profit figure expected in 2020/21.

The JD Williams, Simply Be and Jacamo owner said in June, in one of the last major acts of the Spindler era, that it was closing all 20 of its stores as a result of weak footfall. It is a move that makes commercial sense, despite the associated pain of 270 job losses.

The stores generated a mere £15m of sales in 2017/18, representing just 2% of N Brown’s total revenue. The closures, therefore, mark a radical yet important step in N Brown’s strategy, but more will be required under the stewardship of its new boss.

The recovery of its bottom line – and its share price – depends on it.