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This is why the N Brown share price has slumped!

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The N Brown Group (LSE: BWNG) share price has enjoyed a rich run of form of late. The AIM-quoted retailer has risen around 200% in value during the past year.

However, N Brown’s share price dipped heavily on Thursday after a less-than-enthusiastic reaction to its latest financials. The online clothing giant was last trading 7% lower on the day at 65.4p per share. It had slumped to three-and-a-half-month lows of 64p earlier in the session.

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N Brown’s share price falls on profits collapse

In full-year results, N Brown said revenues dropped 13% year-on-year in the 12 months to February, to £728.8m. Product revenues — responsible for almost two-thirds of total group income — slipped 14.4% in the period. And turnover from its financial services operations dropped 10.4%.

As a consequence, adjusted pre-tax profit slumped by almost half on the year, to £30.1m.

N Brown described the last financial year as “an unprecedented period” as Covid-19 lockdowns caused “an initial immediate and material impact on product sales.”

However, the retailer — owner of niche brands like SimplyBe, Jacamo, Ambrose Wilson and JD Williams — said sales had steadily recovered during the period. It noted that “product revenue improved every quarter following the sudden decline at the onset of the pandemic.”

The firm booked a 25.7% fall in product revenues in the first quarter of financial 2021. But this had evolved to a much-improved 4.3% drop in the final quarter, it said.

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N Brown took steps to concentrate on its core brands during the year. And it said these strategic brands had moved back into sales growth during the fourth quarter, rising 1.3%.

Looking on the bright side

Despite the extreme profits drop, N Brown painted a bright picture looking ahead. It said that “despite the tough trading environment, we have achieved a lot during the year, transforming the shape of our business so that it is leaner, more digitally-enabled, and even more focused on our five strategic brands.”

As well as those aforementioned clothing brands, ones which primarily focus on the plus-size and ‘older’ fashion segments, N Brown also launched its Home Essentials homeware brand in April 2020. The move boosted its ‘Home & Gift’ product mix, from below 30% in financial 2020 to 41% last year.

N Brown also took time today to praise steps that have “significantly strengthened the capital structure of the group.” The UK retail share embarked on a £100m equity raise late last year to reinforce its balance sheet and to bolster its growth plans. As a result, adjusted net debt at the business dropped 39.4% year-on-year in fiscal 2021 to £301.1m.

Looking ahead, N Brown said: “We remain cautious on the external environment given the uncertainty around the relaxing of the government restrictions and the end of the furlough scheme.”

But it added that it was “heartened” by the strategic progress made last year, and it affirmed its product revenue growth target of 7% per year over the medium term.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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