Retail group N Brown (BWNG.L) lost over a fifth of its value on Thursday after reporting a slide in sales over Christmas and problems at its credit business.
N Brown, which owns brands such as Jacamo, Simply Be, and JD Williams, said sales in the 18 weeks to 4 January fell by 4% compared to a year earlier. Total revenue in the period was down 5%.
The company slashed profit forecasts on the back of poor sales and problems at its credit business. N Brown said it now forecasts a pre-tax profit of between £70m ($91.3m) and £72m for this financial year. Investors had previously expected profits of £83.6m.
Shares in the company crashed over 20% at the open in London.
Shore Capital, which is the house broker for N Brown, said the profit warning was largely driven by poor performance at N Brown’s financial services arm. The retailer sells many of its clothes on credit, which contributes an extra revenue stream.
Revenue at its financial services arm fell 4.6% over Christmas. N Brown blamed “wide-sweeping regulatory intervention across the financial services sector” and changes in accounting policies. Shore Capital analysts Clive Black and Darren Shirley said this was “a notable surprise.”
N Brown cut profit margin forecasts across its business due to “the highly promotional market” and lower than expected returns from its credit business.
Chief executive Steve Johnson said Christmas trading had been “encouraging” given widespread discounting across the market.
“Our expectations remain that the retail market will continue to be challenging and promotional, but we are focused on our clear strategy of delivering profitable digital growth,” Johnson said.
N Brown was “making good progress with our ongoing strategic review,” Johnson said, with an update due in April. He warned investors the financial services business was likely to shrink over the next two years due to “external factors.”
N Brown traditionally relied on catalogue sales but has tried to move towards online in recent years. Jacamo and Simply Be are targeted at plus-sized customers and these brands appear to be performing well. Simply Be sales rose 12.1% over Christmas and sales at Jacamo, which sponsors Sky’s Soccer AM, rose 2.5%.
N Brown joins a growing list of retailers who have struggled over the festive period, which is normally a bumper period for sales. Superdry (SDRY.L) and Joules (JOUL.L) both issued profit warnings last week and department store John Lewis said it may have to cut staff bonuses for the first time since 1953 after poor Christmas trading. Retailer Quiz’s (QUIZ.L) stock crashed 17% on Wednesday after reporting a 9% slump in sales over Christmas.