N Brown In The Pink

With retailers generally reporting 'challenging' market conditions, home shopping -- both the catalogue and internet varieties -- appears to be thriving. At least that's the story at N Brown Group (LSE: BWNG), the Manchester-based mail-order retailer that includes such brands as Classic Detail, Oxendales, and Shapely Figures.

There's a common theme to these brands; the company's strategy is to concentrate on larger sizes for an older clientele. N Brown categorises its brands by target age group, and it's encouraging to see that in their world 30-45 year olds are classified as 'young'.

Arguably, the niches that N Brown is targeting are not quite as competitive as general clothing retail, but it is still essential to have the right offering for the market. Management has concentrated on getting this right.

And while some might question the wisdom of targeting the more mature customer, it's clear that over the longer term they will account for an increasing proportion of the population. The company itself is no young upstart either, having been around in one form or another since the 1850s, so it's no surprise that they take a longer term view of the demographics.

This morning's full-year results show that the plan is working. Sales from continuing operations were up 8.2%, driven largely by an increase in mid-season mailings, and pre-tax profits rose 25.9% excluding exceptional items. Gearing fell from 55% to 38%, with interest covered a healthy 8.7 times.

None of this was really news, however. The company issued a positive trading statement in late January, with only five weeks left to the end of their financial year, so the results were pretty much in the bag already. In the meantime the share price has risen 35%.

So what the market was really interested in was N Brown's update on trading for the current year: Group sales increased by 7.1% for the first ten weeks of the year, despite a "generally weak consumer retail environment". Internet sales accounted for 20% of the total, up from 16% in the year just ended -- this is important, as there is a tendency for internet customers to spend more than catalogue shoppers, and the associated operating costs are lower. Management remain confident that they can make progress for the full year. The market reacted accordingly, with shares up 2% at 232p.