Coronavirus sees N Brown pull dividend and slash spending as demand slumps

(Sharecast News) - Online fashion retailer N Brown has pulled its dividend and put the brakes on spending after a "sudden" slump in trading.
The Manchester-based company said trading in the first two weeks of the financial year had been in line with expectations, but conditions had deteriorated rapidly since then. Last week there had been a "very significant and sudden reduction" in customer demand, with daily product sales more than 40% lower than expected.

The retailer, whose brands include Simply Be, Jacamo and JD Williams, said: "While it is impossible to give accurate guidance, we are anticipating a material reduction in demand through the 2021 full year."

As result, the company said it was significantly reducing marketing spending immediately and "for the foreseeable future"" if market conditions do not improve, and was stopping all non-essential capital expenditure.

It is also in talks with HMRC to defer tax and National Insurance payments, has halted stock purchases, is freezing recruitment and is "reviewing organisational structures".

Regarding liquidity, the group said it had financing facilities in place totalling ?652.5m, but warned: "While the group is currently in compliance with its existing banking covenants, the downside scenario modelling we have conducted for Covid-19, involving a significant and sustained reduction in customer demand, indicates the need for amendments to existing banking covenants, changes in the way our securitisation facility operates and potentially additionally facilities."

It added that it was now in discussions with its "long-standing, supportive" lenders and was exploring ways to maximise the value of its "significant unlevered" debtor book.

It is also not recommending a final dividend for the 2020 financial year, ending 29 February, and will suspend all further payments "for the foreseeable future".

N Brown said it was currently reviewing the impact of the outbreak on its bad debt provision for the current year, and said that while it could not yet be certain what that would be, it was able to confirm pre-tax profit for the 2020 full-year would be lower than the previously guided range of ?70m to ?72m.

Shares in N Brown were off 14% at 22.90p by 1230 GMT.