N Brown in talks with lenders as product sales drop 40%

By

Sandra Halliday

Published
Mar 23, 2020

N Brown, the owner of JD Williams, Simply Be and Jacamo, said on Monday that while trading in the first two weeks of its new financial year was in line with expectations, recent trading has plunged.

During the last week, it has seen “a very significant and sudden reduction in customer demand with daily product sales down in excess of 40% compared to expectations”.

And it expects this slow trading to continue, even though the company is online-focused, a channel that’s widely expected to do better than physical shops, most of which are closing anyway.

As a result, it has taken a number of steps to reduce costs and preserve liquidity, including cutting marketing spend “with immediate effect and for the foreseeable future if market conditions do not improve”.

It’s also “freezing all recruitment and reviewing organisational structures” and stopping stock purchases immediately, “thereby aligning stock levels for SS20 with reduced customer demand”.

Its aim in all of this is to preserve its liquidity. And while on that front it said it has financing facilities in place totalling £652.5 million, it has maxed out much of this. The group is currently in compliance with its existing banking covenants, but the downside scenario modelling it has 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 additional facilities”.

It’s in “collaborative discussions with its long-standing, supportive lenders and is exploring options in relation to maximising the value of its significant unlevered debtor book”.

It also thinks its previous guidance of £70 million to £72 million in adjusted pre-tax profit won’t be met. It’s full-year results for the 12 months to February 29 will be released on April 29.