A slightly disappointing update from N.Brown today with first half revenues expected to be down by 0.6% or 0.5% in like for like terms, having been up by 2.6% and 2.%% after 15 weeks when they last updated the market. This seems to have been driven by a poor second quarter on the back of planned changes to some ranges and their marketing spend which was moved into customer recruitment and has been re-phased to the second half. This has led to change in the pattern of marketing spending from a 50:50 to a more normal seasonal ratio of 40:60 for Spring/Summer vs. Autumn/Winter.

They also reduced the range of non core and electrical items in home & gifts which led to a 9% fall in sales in that category as this reduced credit sales in higher risk areas and also reduced their finance income too. On all these changes they say:

"This is a transitional year in which we are moving further away from a traditional mail order model and the changes we are implementing have had the effect of slowing sales growth in the first half and deferring some of our annual sales into the second half."

In addition they are also implementing a systems development programme and launching a credit based offering in the US. So lots of changes under the new chief executive which seem to have contributed to a disappointing first half performance and leave them with a lot to do in the second half, although they claim to be on track to hit their full year forecast, although I note analysts forecasts have been trending down this year since April and may continue to do so after this update.

Summary & Conclusion.
The shares have reacted negatively to the announcement this morning being down by around 3 to 4%. This leaves them on around 14x with a 3.7% yield before any changes on the back of these numbers. So not especially cheap and they have now left themselves with much to do and some risks in terms of delivery in the second half which could lay them open to having to issue a profits warning if things don't pan out as they expect.

Probably worth holding if you are in them as they are looking fairly over sold, albeit they don't look like a bargain yet. Therefore if you are not currently holding them, I would suggest it is probably worth waiting to see how the second half turns out as it looks like the forecasts and the share price may continue to drift down.

...N. Brown (BWNG) the catalogue, on line and high street retailer also does clothes for big guys, the home and electrical items too, They have reported their interim management statement for the 15 weeks to 14 June 2014 today.

These show total revenues up by 2.6% with 2.5% LFL growth which they say is in line with their plans. Within this they highlighted the following in the statement:

o  Performance of Simply Be and Jacamo up 6% and 10%
o  Store like-for-like sales were strong at +20%.
o  The "Famous Five" Home categories were up 10% YOY
o  Demand in the USA was up 15%.

I found it encouraging that the new stores were doing well and that the US seems to be on track as this has struggled to gain traction so far. Otherwise they talked about this being a transition period with some changes to their marketing, reduced emphasis on home and electrical and on line now being 58% of sales. Angela Spindler, Chief Executive, commented:

"We are in a period of transition to move us toward our mission to be 'the leading Global retailer famous for making shopping for fashion easy and enjoyable regardless of size'.  We have stepped up the pace of change and we are making progress.  We are modernising the business, broadening our appeal and refocusing on our differentiated proposition - fashion that fits.  Best of all our customers are already noticing these improvements, as we can see from the performance through the quarter.  We have improved the quality of our sales and are on track with our plans for the year as a whole".

See the IMS link above for the statement and their full comments on the changes they have been making. While on the shares they have been weak since they peaked at around 600 pence earlier this year where they had started to look a bit expensive. The final results were also a bit underwhelming as last year was described as a year of transition and has led to around a 5% down grade in earnings forecasts in the last three months. This has led to the shares falling back quite sharply in recent months towards the 12 month low of 422 pence. This shows the importance of monitoring results and subsequent earnings changes. 

Down here they look more reasonable value trading on about 15x this years forecast earnings (before any changes after this update) with a yield of 3.5% on the back of a forecast 7% increase in the dividend which is nearly 2x covered by earnings. The shares are off about 3.5% first thing so maybe the market was disappointed by this so will have to watch the forecasts again in the next few days.  Aside from thus it seems OK to me, if not outstandingly cheap (it's certainly better value than ASOS on 50x) but obviously the share price momentum doesn't look so hot right now. However this does look like another over sold mid cap (see chart below). In addition they are still cum an 8.56 pence final dividend which goes XD on 2 July 2014 and is paid on 1st August 2014. So if you buy around this price you can look forward to around a 5.5% yield or so in the next 13 months plus or minus whatever the share price might do. So seems like another reasonable mid cap opportunity, but no guarantees of course. I can't see any shorts in the shares, but I'm sure you'll find some on their sites if you need some new ones for this fine weather we're having.