Home shopping company N Brown Group, owner of brands including Figleaves, today unveiled a 17% leap in online sales and said it would continue to invest in expanding overseas, trialling stores for online and catalogue brands, and working towards individually personalised websites. Thus, it said, it would lay the foundations for a future when when most of its sales would come from the internet.
Lord Alliance of Manchester, group chairman, said that this investment would dent short-term profitability but that “we expect the benefits to come through from 2012 onwards.”
Ecommerce turnover at the company, which also owns brands including Simply Be, Marisota and Jacomo, rose to £175m in the first half of its financial year. Online now represents 48% of N Brown’s home shopping revenue. Pre-tax profits rose by 5.9%, compared to the same time last year, to £44.8m on total revenues of £363.7m, a 4% rise on last time.
Like-for-like sales were up by just 1.5% in the first half, however, and were down by 1.5% in the first six weeks of the second half. Net borrowings rose to £196.7m, up from £173.1m last time.
The company said its online success followed improvements to website functionality, which it said made its websites easier and faster to use, and to overseas expansion. Some 75% of international revenue now comes from online sales.
Alan White, chief executive of N Brown Group, said: “We have delivered a solid performance for the first half, driven primarily by increased online penetration and our younger titles.”
The successfully-completed £7m implementation of a web content management system across N Brown Group’s 50 websites would, said the group, provide “the platform for the next generation of online enhancements, with individual personalisation of websites the ultimate goal.” This gave them a “highly sophisticated, state-of-the-art system” that would prove a solid foundation for “an era when we expect a significant majority of sales to be via the internet, with all that means for cost benefits and higher order values.”
The group also said it had launched its first stores for the previously online and catalogue brand Simply Be, in Liverpool and Bury. International income for the same brand rose by 173.3% to £4.1m following its launch in the US. Meanwhile sales at its menswear brands were also performing well despite “an exceptionally difficult economic environment for our custmers” with Jacomo sales up by 66%. Online lingerie brand Figleaves had seen an improvement in revenues thanks to the increased range of own brand items, which now account for 19% of its range and was expected to contribute to profits next year. In ladieswear in general, said the group, customers were choosing to "prolong the life of their everyday clothing and spend their reduced disposable income on special items." Thus, sales of premium and branded products were doing well but basic lines were faring less well. Lingerie sales were up by 20%.
White added: “We believe our strategy to invest in the development of our brands, both nationally and internationally, the improvement of our online capability and the flexibility of our business model will mean we are well-positioned for the future.”
This appeared to be borne out in the Simply Be results, where UK growth was only “modest” but international sales rose to £4.1m in the period, compared to £1.5m last time. Growth was particularly fast in the US but in Germany, it said, the “returns rate remains stubbornly high.” More than £3m invested in the customer database meant, however, that international activities were loss-making overall, losing £2.7m in the first half, a figure expected to rise to £4m in the full year.
The company said its youth brands, including Simply Be and Jacomo, were growing faster than its midlife brands, which include Marisota and House of Bath and had stayed unchanged from last year. Meanwhile brands that sell to older customers, such as Julipa, were suffering as sales to the 65+ group fell by 5%.
Another downside came in the form of cost inflation, running at 8% because of higher raw material and labour costs in the Far East.
Our view: The N Brown Group results make for fascinating reading, giving as they do a powerful insight into both how and what consumers are now buying. The company says it is preparing for a future in which most of its sales happen online - but it is opening shops, recognising the general consumer trend move towards multichannel shopping environment. With UK sales relatively flat it is also looking overseas for international sales.
But these results are also interesting when it comes to what people are buying online. It seems online menswear sales are growing but in ladieswear, consumers are cutting back on their spending on basic items - not because they can't afford to shop at all but because they want to spend more on those special items.
And with the move towards online shopping, it seems younger customers are buying more from N Brown Group brands, while those aimed at middle-aged customers are staying flat and those older customers are falling. Could this be not only because 'older' customers' incomes are staying flat or falling, but also because a significant number of them are now choosing to shop outside those brands aimed specifically at them?