Member Info for Paulof2

To put the marketing into context on another forum I calculated that the gross profit loss from sales down 48% for clothing and up 75% for home and gifts would mean a reduction in gross profit of roughly £25m on an annual basis.

Compare that with an 80% reduction in marketing once again assuming annual and that would be a roughly £125m saving .

So I think it’s incredibly important that you consider both together rather than in isolation. I actually think this could be some of n browns best profits.

I was thinking of this further last night, this is actually the greatest opportunity in recent history for n brown to really reflect on its business and marketing and make some key strategic decisions, some of which I know were already in the works.

N brown has been in a battle of late of constantly trying to prop up its sales and has had to do so through heavy paid marketing. If it steps back for a moment and thinks actually you know what let’s cut back on our marketing further, the sales will inevitably drop but our profit will increase.

This would put n brown on a much stronger base with surely at least £100m profit a year and then it can focus on growing again more sustainably. It would have the added benefit that the warehouse and structure would always be ready to take on the large volume from last experience.

Such a radical decision would not be feasible in normal times as it would be slated by the market but actually in the current situation I think it would make an interesting approach. I believe that’s part of the reason why n brown has made the decision to drop its marketing so much at the moment, sure some of the demand won’t be there so it would have dropped somewhat anyway but such a large scale drop I think there’s a bigger reason behind it.

I’d be interested to get other people’s opinion on this though, would you rather sales drop relatively significantly but with a larger profit. Or battle to keep this high sales level and pour more money back into paid marketing?

Clemoc, agreed they do spend a lot on paid marketing more than most competitors however they have recently been investing into more organic for example they recruited roughly 20 SEO heads however sadly growing organic isn’t easy and is more of a slow burner you can’t just throw money at it sadly.

This reliance however is actually why I was so impressed by the trading update. I thought that if you reduce marketing by 80% here as they did sales would be tumbling maybe 50-60%. However that wasn’t the case and overall they actually only dropped 25% which given such a large reduction in marketing I was very pleasantly surprised.
Especially when you have to consider that demand would be down anyway due to the situation in general e.g even Asos sales were down 20%. With no mention of any marketing reduction for them.

What I find amazing is that the P/E ratio here is likely to be pretty close to 1 following the full year results, compared with boohoo which may be growing but has a ridiculous p/e of more than 70!

Just shows ridiculously undervalued this is I think you’d struggle to find a more undervalued company anywhere

What you also need to take into account with those sales changes is the reduction in marketing, at the last update they said sales were down 25% overall but with a reduction in marketing of 80%. That is a huge amount and more than a 100m saving on an annualised basis!

Not sure why there would be a RI as of last announcement they’d announced 50m government loan facility, paid off overdraft and also managed to generate cash on top of that. (Looking at between first covid trading announcement and most recent) it looks to me like they are generating a lot of cash so wouldn’t make sense for a raise imo.

I’ve just stumbled on this today, their trading update seems far too vague for my liking. Maybe I’ll buy in after the next update

That was a bit higher than I was expecting I was expecting some to come out in the 60 range but it’s good that brokers are recognising it’s potential

Great result in the current scenario we are in, there’s not many companies who’s sales are only down 25%.

Even the big players like Asos said their sales are down 20-25% so to have sales down 25% here with also a 80% reduction in marketing in such a marketing heavy industry I’d say was actually very good. (80% reduction full year marketing looking at in excess of £120m saving)

Overdraft paid off, extension of facilities this is one solid business. The only possible reason it could be anywhere near these prices is that people thought it would go bust, now we know it won’t I expect a rerate.

Yes hadfield tends to be larger items furniture white goods etc where as shaw is mainly clothes, actually went for a tour around shaw site a year or so ago was really quite interesting.

Interesting point on the returns could mean that when the results do come out the results are actually even better than stated (due to when you recognise revenue you essentially have to deduct an amount of returns based on normal levels) that would be nice if that ends up getting reduced during the year as could be a substantial amount.

Agreed. Let’s also not forget when people do end up back out and about clothing sales will likely pick up anyway so I see it as a win win really. Something like this is actually really good for jd Williams who is targeted at a somewhat older customer many of whom will have likely ordered online for the first time and I think the momentum of that will continue also and should benefit the business in the future.

All the best

Could do I suppose but more likely to sell off the loan book really. A lot of the items are actually the same between brands eg simply be and jd Williams sell a lot of the same clothing so it wouldn’t really make sense to sell off

Unlikely really given the large amount of shares the alliance family has and I doubt they’d be accepting anywhere near even double these prices for them

What’s also a good sign is that it’s not just jd Williams, even the smaller brands premier man etc and even oxendales (the Irish component) looks to be seeing great growth which is also positive because it doesn’t sell very many white goods which are low margin anyway

You do have to be careful with free sites like this as they can double count visits etc so 700% does seem ridiculous however the general direction of them does appear to be up which is a brilliant sign.

I also think what’s very encouraging is the organic growth so it’s consistent with a reduction in paid marketing which is fantastic for cash and profit.

I’d heard less than 20% down on clothing while home sales up massively.

The sales down mainly due to reduced marketing in order to build cash balances which is working brilliantly.
Could be wrong hopefully they are up ha!

People have for some time been critical of management here but I must say I think they’ve done a fabulous job.

All these costs that have held back profit for the past few years for example cutting the shops, and shifting marketing to profitable growth rather than marketing for the sake of it doing direct mail etc this just means that business is so much more flexible.

Online marketing can be turned on and off and I for one wouldn’t be that comfortable still holding here if they were still burdened with the old stores.

The way I see it is with a large marketing budget that can be rapidly reduced, no stores and a consistent stream of financial services income I think n brown is made for difficult times like this. It has shown it time and time again through past financial crises’s and this time I believe will show it even more with it’s now much leaner cost base.

Good to hear people are hearing the same information as me. To add - most of the marketing department are currently furloughed which just shows how well the business is performing with those traffic figures even though the marketing spend has been substantially reduced. Marketing is a large part of the cost base and has been decreasing quite dramatically over the past few years anyway but no doubt this will have reduced it further.

I’d imagine the current delay is with bad debt modelling of the financial services element as it is quite subjective and obviously the auditors need to be in complete agreement but I wouldn’t worry about. The company comfortably survived the last recession and it is a much bigger beast now with a much more flexible cost base, combine that with furlough and government schemes and I think this is a very safe bet.

I’m also in really big here but with good reason and if it drops back further with the market I’ll be looking to pick up more.

Clothing sales understandably down but still have a solid fs residual income stream and home and garden sales through the roof.

Good luck everyone it’s only a matter of time before we reap the rewards.

I’m actually looking forward to tomorrow not because of the quarters results but actually to get more of an idea what their future outlook is I think that will be telling

Didn’t realise how bad this was. Might take a punt at 1p on Monday

Here we go..