Strong foundations
FY15 marks a period of transition for Brown(N.)Group (LONDON:BWNG) while it invests in the further development of its multi-channel offering and builds towards an omni-channel future. As detailed in our report ‘Challenging the Internet Premium’, we believe that a well invested multi-channel strategy and strong brand focus are key drivers for future retail success, and provide strong support for guidance of double-digit revenue growth in FY16.
Strong foundations
FY15 marks a period of transition for N Brown while it invests in the further development of its multi-channel offering and builds towards an omni-channel future. As detailed in our report ‘Challenging the Internet Premium’, we believe that a well invested multi-channel strategy and strong brand focus are key drivers for future retail success, and provide strong support for guidance of double-digit revenue growth in FY16.
Slow start, but in line with expectation
Revenues +2.6% marked a slow start to FY15, but very much in line with management’s expectation as it moves marketing investment from pre- to mid-season, to reflect a shift from catalogue to online sales and to enable unrestricted refreshment of ranges. Management’s confidence in achieving full-year expectations is supported by an acceleration in sales performance through May/June, as the new marketing strategy started to take effect.
Strong brand focus
N Brown’s focus on an older age group and larger sizes not only differentiates it from the majority of its clothing retail peer-group, but also means it is directly addressing the needs of a growing percentage of the UK population. While brand proliferation in the past has caused inefficiencies and loss of focus, its new strategy to focus on core brands, with the overarching mission to provide ‘fashion that fits’ across a scalable multi-channel platform, provides an attractive outlook.
Investing for an omni-channel future
N Brown is going through a period of investment focused on new stores (it plans to open seven in FY15), consumer marketing and acquisition (re-channelling investment away from its traditional catalogue business towards digital recruitment), and upgrading its systems for customer facing (improving its next day delivery cut-off, and developing a dense click and collect network) and back office, to create foundations for its multi-channel, multi-national expansion plans. In addition, its focus on tailored segmental marketing to deliver real-time personalisation, together with its renewed brand focus creates strong foundations for an omni-channel future, setting it ahead of the majority of its retail peer group.
Valuation: Attractive
With a 13.1x P/E (calendarised 2015) we view the share price as attractive.
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