N Brown's sturdy growth slightly shy of City forecasts

Sales grew 3.2% over the extended 18-week 'quarter' to 6 January, which was slightly short of the average of City analyst forecasts at 3.6%, with some having expected growth of as much as 5%.

Chief executive Angela Spindler remained confident of still hitting full year profit forecasts, but via a different route, with gross profits margins from products now expected to be lower but higher from financial services, together with a tighter control of costs.

Predominantly due to higher promotional activity, product margin is now expected to decline by 225-250 basis points compared to the 70-120bps fall previously indicated, while financial services margin guidance is for a gain of 500-550bps, from 100-200bps previously, a result of a further improvement in the quality of the customer loan book, together with several initiatives improving our customer proposition launched during the year.

Guidance for growth in group operating costs, excluding depreciation and amortisation, was cut to 4-4.5%, from 4.5-5.5% previously, as a result of a continued tight cost control. Guidance for the expected tax rate was upped to 23% from 22%.

Product revenue growth fell to 2.7% in the quarter from 7.5% in the first half of year. Sales from 'power brands' were up 7.3%, led by plus-size brand Simply Be's 14.5%, with mature-lady-focused JD Williams up 3% and Jacamo, for 'real men', rising 4.6%.

Secondary brands were a drag, falling 8.4% in the quarter after the 1.4% improvement in the first six months of the year. The largest such brand, Fashion World, was hit by marketing investment being diverted into Power Brands, while Figleaves underwear remains part-way through its turnaround led by a new management team.

Online revenue rose 9% as penetration increased 400bps year-on-year to 74% and 82% of new customer demand generated online during the period, up 500bps year-on-year.

During the period there was a further upgrade to the Simply Be app, the launch of a Simply Be loyalty programme, delivery subscription offers rolled out to all three Power Brands and further progress made with the use of social media data for credit decisioning.

Sales from the USA surged 22% at constant currency rates, or 19% reported, moving back into positive growth in line with Spindler's new marketing strategy, including strong influencer marketing. She expects performance to continue to accelerate.

Plans for Global Ship Anywhere are expected to go live by the end of this financial year, which is anticipated to further underpins future international growth.

House broker Shore Capital said it was "no surprise to us that growth has been more subdued across the group’s product activities" due to tougher retail market conditions and comparatives from a strong third quarter the previous year.

Combining trading momentum and materially revised gross margin and cost guidance, ShoreCap left its profit forecasts unchanged at £81.2m, though nudged down earnings per share c1% to 21.7p due to the tax guidance.