Sales and profits at internet and catalogue home shopping firm N Brown came in ahead of expectations in the first half, with like-for-like (LFL) sales growth accelerating in the second quarter.

Total revenue in the 26 weeks to September 1st came in at £379.3m, up 4.3% on the year and ahead of the consensus estimate of £371.7m.

The company said that revenue growth was largely driven by a combination of those brands targeted at the under-50 customers, strong online trading and a higher level of financial income.

Sales from the under-50 brands increased by 12% to £143m. Internet sales rose 12% to £196m and now account for 53% of home shopping sales, up from 48% last year.

Meanwhile, profit before tax and fair value adjustments fell by 4.5% to £42.0m, still ahead of the £40.6m forecast. Earnings per share of 12.5p beat the 11.1p consensus prediction.

"I am delighted that the revenue and gross margin trends have been on an upward trajectory throughout 2012. We have seen double digit growth in the revenue from our younger brands, such as Jacamo and Simply Be, and in our menswear and home and leisure product ranges," said Chief Executive Alan White.

"The 10.1% increase in sales at the start of the second half is also very encouraging and all our major brands and product areas have contributed to this growth.  This gives us some optimism in the outlook for our second half performance."

The gross margin fell by 1.6 percentage points to 53.3% due to the product, customer and channel mix, the group said.

N Brown has declared and approved an interim dividend of 5.45p per share, up from 5.29p at the same time last year. This will be paid in January 2013.

LFL sales accelerate



At the 17-week stage, LFL sales were up 1.9%, but this increased to 3.7% by the half-year stage. Equity analyst Joe Spooner from Jefferies said that this suggests LFL growth of around 7% over the final nine weeks of the period.


Spooner said: "We expect the market to favourably focus on accelerating LFL sales since the July update in the 1H13 results. But we'd also highlight the return to growth in the active established customer base as positive for the longer term outlook."


Broker comment
Seymour Pierce has maintained its "hold" rating on N Brown with a price target of 250p, saying: "growth has been relatively pedestrian in the last two years and is expected to remain so with the current strategy. This is reflected in its valuation, we believe, with the share trading on a full year price earnings ratio of 9.9 times on our forecast for full year 2013 pre-tax profits of £98.9m, earnings per share of 27.4p (consensus £96m) and full year pre-tax profits of £104.5m, earnings per share of 28.8p (consensus £101.5m)."

It adds that it is conscious that Lord Alliance stepping down with other management changes could act as a catalyst for more exciting growth or interesting strategic changes. However, when and if this will happen is unpredictable.

However, Jefferies, joint house broker to N Brown, has a "buy" rating on the stock with a price target of 280p. It comments: "We expect the market to favourably focus on accelerating like-for-like sales since the July update in the first half 2013 results. But we'd also highlight the return to growth in the active established customer base as positive for the longer term outlook."

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