N Brown reports sales up but bad debt takes margin toll

The catalogue and online specialist said there had been strong demand from existing customers in the 19 weeks to January 10, when sales to new shoppers were level with the previous year.

N Brown’s rate of gross margin fell 1.5 per cent, approximately half of which was a result of targeting younger customers who represent a higher credit risk but lower operating costs. The remainder of the bad debt was because of a fall in rates offered by third-party debt collectors.

N Brown said: “This is more a reflection of the high level of arrears from both secured and unsecured lending in the debt recovery marketplace than any material change in the quality of the debts we are transferring.” N Brown is ramping up its own debt collection operations.

N Brown confirmed it would launch its Simply Be brand in Germany in February, when it will also open English language websites in “a number” of European markets.

N Brown was confident of meeting profit expectations and said: “We fully recognise the difficult environment in which we will be trading in 2009 and have adopted a cautious stance on customer recruitment, credit management and stringent control of overheads and cash flow.”