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Great responses Paulof2 and skittish. I really enjoy this BB. Thank you very much
Hi Skit, you’ve made some good points regarding debt. However, just an FYI n brown no longer has any physical stores they were all closed last year, the 10% non digital is catalogue based customers.
In my eyes the reason the sales have not recovered fully is because this was a very heavily marketed business, they’ve said their operating costs are reduced by 46% and majority of that is marketing so in any business with that scale of a marketing cut you wouldn’t expect sales to remain flat.
It’s not necessarily a bad thing and in my eyes is the right view, when the demand is there as people go out and about and on holidays they can start to rescale up the marketing albeit through more efficient channels and I’ve no doubt the sales will return. In the Q &A on Thursday they mentioned how going forward there will be a continued reduction in marketing but it will flex back up once the demand is there.
So it’s definitely a deliberate move and they acknowledged in the Q&A that this is the perfect time to accelerate that transition, they could throw millions on marketing to get those extra 20% sales at the moment but likely to have little impact or even be negative on the bottom line.
The way I'd look at that is that only 91% of the sales are presently digital.
So that leaves around 10% non digital, that is from retail sites.
If product sales are down 21% from pre covid levels, as the retail sites account for 10% of total sales and they are completely closed, then digital sales overall are down around 10% over the three weeks to 25th June 2020 compared with pre covid.
This could partly be explained by cutting non profitable digital sales lines.
This is what supersonic BOO said about recent trading "Trading in the middle of March through to early April was mixed, as a result of the impact of the COVID-19 pandemic, initially with a marked decrease in year-on-year growth. Performance across all of our brands and geographies improved throughout April, with a robust performance delivered in May."
So even they have not been immune from the covid related shock, but being on a premium rating, p/e around 60, they have recovered far quicker than N Brown, which is still dealing with the fag end of its restructuring.
N Brown are on a p/e of 1 to 2, but I'd suggest that doesn't give credit for the fact that despite not performing as well as BOO they are still doing pretty well in all the circumstances, and deserve to be higher.
That sales may still be suffering is also suggested in the alexa figures - Home Essentials and Jacamo performing better than pre covid, J D Williams and Simply Be not doing quite as well - someone suggested clothes shopping for holidays may still be suffering, no foreign holidays as yet.
What really strikes me in the last figures is the reduction in debt £13.5M per month since end February - okay they cut costs aggressively, but it doesn't appear to have impacted the business too much. At that rate they'd be debt free by January 2023.
Equivalent to half a £billion debt to £0 debt in 3 years. That rate of reduction is unlikely to be sustained, but even in these difficult times they must be generating masses of cash to deal with the debt so fast.
And once the debt is at lower levels then a whole range of possibilities open up for a lean and highly cash generative digital business.
But at that stage the shares will no longer be 36p.
I'm trying to work out the sales drop. OK it fell off a cliff in the initial stages of corona, but being largely ditigally based now, and people saying sales have recovered, why are they still something like 25% down on pre corona levels? Something just doesn't feel right.
The old saying of "if something seems too good to be true, it normally is" springs to mind.
I would really like to see sales exceeding december 2019 volumes. But wdik
IMO
Well It will be interesting to see what next week brings..
FY forecasts for this year before covid were £78m-£84mil Profit - The Mcap is just £104m which seems crazy cheap Trading on a P/E of 1
Covid had A big initial Negative impact on sales in march but quickly recovered by April
Going forward I’d expect digital on-line retailers like NBROWN to have their trading boosted by lack of footfall on the high streets.
The Potential downside which could hold clothing Sales back is lack of holidays and “nights out” but that also appears to be changing as of now.
You would think Home essentials should benefit from a stay at home spring/summer?
On Alexa traffic ranking the overall strength of the brands is clear -
All figures estimates, 3 month rolling average, may not reflect current position, higher the ranking better the site ie. No 1 is top ranked site in the world.
Home Essentials - 989K to 289K - showing significant and outstanding recent strength, and still moving rapidly upwards
https://www.alexa.com/siteinfo/homeessentials.co.uk#section_traffic
Jacamo - 191K to 173K - significant recent strength, more popular than at the time of the lockdown
https://www.alexa.com/siteinfo/jacamo.co.uk#section_traffic
SimplyBe - 189K to 203K - recovered nicely but not yet quite at pre lockdown levels
https://www.alexa.com/siteinfo/simplybe.co.uk#section_traffic
J D Williams - 199K to 206K - recovered well but a recent fall off in traffic, odd that UK is not shown as top in the audience geography, maybe UK traffic directed elsewhere?
https://www.alexa.com/siteinfo/jdwilliams.co.uk#section_traffic
Overall doing very well.
Adjusted profit pre tax £59.5M, market cap £108M, p/e <2, no dividend but was previously a good payer, net debt £497M (at 29-2-2020) reducing by £10M+ per month.
Dividends - 2018 14.23p, 2019 7.1p, 2020 0p - but clearly generating lots of cash, hence debts projected to fall by £10M per month in FY2021.
Debt actually fallen from £497M at 29-2-20 to £447M at 19-6-20 or £50M /£13.5M per month in Q1 2021.
One of the best potential recovery stocks on the market at present.
All IMHO, DYOR, etc...
The trends that bought INTU down will lift N Brown up.
https://www.bbc.co.uk/news/business-53190714
With this happening today, surely more business coming the way of N - Brown