Everyone at N Brown plays a role in delivering world-class fashion that fits - N Brown Group PLC
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Strategic report
Everyone at
N Brown plays
a role in delivering
world-class
fashion that fits.
We couldn’t do what we do
without the passion, energy
and dedication of our people
to deliver fantastic products and
a great service to our customers.
Our people are what defines
our business. They live and
breathe our GUSTO values
every day and are our single
most important asset.
Everything we achieve as a
business, we are achieving
together. We would like to
recognise and thank our
colleagues for working so hard
to make this happen, and we
are pleased to introduce you
to some of our great people
in this report.
Angela Spindler
Chief Executive Officer
@nbrownplc
N Brown Group plc
Annual Report & Accounts 2018 1
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2,600
colleagues
across
the UK. With the passion,
energy and
dedication to
deliver fantastic
products and a
great service to
our customers.
2 N Brown Group plc
Annual Report & Accounts 2018
Strategic report
Everyone
plays a role
in delivering
world-class
fashion that fits.
#proudtobeNBrown
N Brown Group plc
Annual Report & Accounts 2018 3
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The
spark
behind a modern online
department store
Relaunching the JD Williams brand
Our influencers Midster report
A group of editors and influencers Last summer we commissioned
designed to inspire our customers our third state of the nation
by sharing their life moments. Made report, in association with YouGov,
up of top lifestyle journalists, and surveying over 2,000 women aged
fashion and home bloggers, they 45+. The report looked into body
are here to share their tips and tricks confidence, style and shopping
with the JD Williams customers behaviours, as well as women’s
across all our channels, from the attitudes towards key life moments
Life.Style magazine to the weekly such as relationships, dating,
blogs on our site. healthy living, life adventures
and work-life balance.
Online stats
We have seen good growth in
our social media figures since the
launch of The Lifestore. With over
178,000 Facebook followers, and
engagement growing over 20%,
this is just one way we are
increasing engagement with
our customers online.
+20%
Online engagement growth
178,000
Facebook followers
4 N Brown Group plc
Annual Report & Accounts 2018
Strategic report
JD WILLIAMS
REVENUE (%)
Beth
3.2%
Becki
Jane
The people behind
the new brand
Q: Why did you feel compelled Q: Tell us about the JD Williams
to create the Midster report? product offering
A: Beth – Middle age is no longer that A: Jane – The product has been built
middle ground between young and old around the unique attitude and needs
– it is a vibrant stage of life that is now of the 45+ woman – we design specifically
starting to be recognised as a distinct, with ‘Her’ in mind and we understand our
exciting phase full of new possibilities. customers’ bodies in a way that other
These days, women are better defined retailers don’t. We take into account
by their attitudes, passions, interests and the way bodies change with age and
ambition, rather than just a number, so provide clothes that are on trend and
we wanted to lift the lid on this and talk in fashion but are relevant to her. We
openly about these subjects. consider all occasions and we design to
offer solutions to the challenges women
Q: What was the thinking behind
face as they grow older, considering fabric,
the repositioning of the brand?
sleeve length and styling details to help
A: Beth – We recognised that women her look and feel great.
in their 40s and 50s were misunderstood
Q: What has the reaction been
and underserved. Contrary to beliefs,
to the relaunch?
these women are entering the happiest
years of their lives – “middle” aged does A: Becki – The reaction from our customers
not imply “crisis”! They’ve reached a has been overwhelmingly positive – one of
stage in their lives where they know our customers said “the fact that I can buy
themselves better than ever and they homewares, wide-calf boots, clothes,
feel less guilty about looking after underwear – everything under one roof and
themselves a little more. We listened the new fresh look makes me look and feel
to our customers’ needs and wanted more positive”. For us, it’s about ensuring
to empower them and bring to them that these women are represented – and
a brand which inspires them to live life celebrated! We’re really pleased with the
to the full on their own terms. performance since we relaunched the
brand – excluding the drag from recently
migrated Fifty Plus customers, JD Williams
revenue was up double digit for the year
More detail p36 as a whole.
N Brown Group plc
Annual Report & Accounts 2018 5
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continued Gareth
Ross 85.8%
Customer satisfaction score
Over
2000
user experience tests
Mandy
The people shaping
customer experience
Q: How will Simply Be Perks business, alongside a significant cost saving
increase brand loyalty? versus ad hoc market research agency fees.
A: Mandy – We wanted to let our A: Ross – The user experience labs we run
customers know how important they give us a much deeper understanding of
are to us and give them something back how our customers use our websites and
as a thank you for their loyalty. We offer apps. The tools on our sites allow us to
rewards designed to fit our customers conduct hundreds of experiments to
perfectly by using internal data to tailor scientifically prove which experiences
rewards to a customer’s lifestyle and improve satisfaction and ultimately revenue.
known buying preferences, such as
Q: How popular has the delivery
beauty products, or discounts on certain
subscription service been?
products. Our simple opt-in rewards
programme encourages long-term A: Mandy – We are really pleased with
loyalty by giving everyone, not just high the uptake of our delivery subscription.
spenders, monthly perks. How and what We launched the offer for our Jacamo
we reward our customers is central to customers over a year ago and we’ve
the rewards programme and having seen a double-digit increase in both order
data-driven decisions underpin our frequency and net sales per customer. We
programme has helped us to exceed our are always looking for ways to improve our
members’ expectations. Our Simply Be offering for our customers and this has been
customers are highly digital so it was another successful step in delivering the best
also important that we developed the possible service to our customers.
functionality for our customers to view
Q: What have the upgrades to the
their rewards, interact with the Perks hub
Simply Be app meant for customers?
and redeem their rewards via all our online
channels, including our Simply Be app. A: Ross – The subsequent releases to our
iOS and Android Simply Be apps have meant
Q: What insights have you gained from
that we can continue to improve our offering,
your customer panels and User
including features such as recently viewed
Experience (UX) labs?
items and predictive search, and ultimately
A: Gareth – Our customer panels the experience for our customers. With an
are a great way to gain real customer App store rating of 4.8 out of 5, we are seeing
opinions and insights on a whole host the results of these improvements first hand.
of topics; from our product offering By investing in our in-house app development
to feedback on our latest TV ad. Based capabilities we can embed fortnightly releases
on the findings we have driven a to improve the functionality and features of
number of actions throughout the our apps and roll out onto our other brands.
6 N Brown Group plc
Annual Report & Accounts 2018
The
Strategic report
passion
behind delivering
the best customer
experience
Driving sales by refining
the customer experience
Improving our app offering Launch of Simply Be Perks
We have seen some encouraging After seeing positive results from
results with our Simply Be iOS and the initial pilot of our new rewards
Android apps, with over 100,000 programme, Simply Be Perks, we
downloads across both platforms. launched to our whole Simply Be
In February, we launched the customer base in April 2018.
JD Williams app; our first app on Designed to engage with our
our own platform and an important customers on a personal and
step in bringing our technology emotional basis, driving loyalty
capabilities in-house. based upon a genuine value
exchange, we have created a new
Customer panels and UX experience to increase brand love
and advocacy with our customers.
labs allowing agile ways
of learning Capturing customer loyalty
A combination of user experience
labs and testing, and our customer
with delivery subscriptions
panels, which we have across all With a delivery subscription
three of our Power Brands, allow available on five of our key brands
us to easily and quickly gain real entitling customers to 12 months
customer insights and the ability unlimited next day or nominated
to test and learn in an agile way. delivery for £9.95, we are seeing
encouraging results demonstrating
the loyalty we are driving through
this offer.
N Brown Group plc
Annual Report & Accounts 2018 7
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Shtu
C art
ris
+550bps
Chris Financial Services gross margin
120bps
Improvement in arrears rate
FINANCIAL
SERVICES (%)
The people behind
Financial Services 3.5%
Revenue growth
Q: How has the quality of the
customer loan book changed
this year?
A: Stuart – The quality of our book has
improved during each of the past few
years, which you can see through our
provision and arrears rates. We’ve Most of our customers pay more than the
improved our lending decisions, which minimum payment in any case, but, as we all
has significantly reduced the number know from a personal perspective, there are
of first time credit defaulters and our times of the year when we all want to spread
fraud rates, and at the back end of the the costs a bit more.
book we’ve been proactive in helping
A: Stuart – The customer take up was
customers in financial difficulties, in
greater than we expected, and the area
many cases reducing or freezing the
where we saw the biggest effect – which
interest we charge them during this
was a positive for both customers and us
process. All of these we’ve been doing
as a business – was in arrears, with far more
for several years now, and we continue
customers paying the minimum charge
to benefit from these actions.
and therefore not getting behind on
Q: C
ould you tell us more about their payments.
the changes you made to
Q: H
ow are you using new technology in
minimum payment changes,
Financial Services, and how important
and what you saw as a result?
is this going forward?
A: Chris – We are always trying to find
A: Chris – I view this as an important and
ways to give our customers more choice
also really exciting part of my role. There is
and flexibility in how they shop with us
so much to be gained – be that in terms of
and how they manage their finances.
efficiencies, growth opportunities or just
With the uncertain economic outlook we
working smarter – from using innovative
anticipated that pressure on household
new technologies. I’m particularly excited
incomes was likely to increase. To ease
about the latest developments in FinTech,
this pressure, we took the decision to
for instance how AI is being used and the
reduce the minimum payment required
increased access to data across the banking
for the personal credit account.
industry. All of these developments should
allow us to further improve the experience
and ease of shopping for our customers.
More detail p39
8 N Brown Group plc
Annual Report & Accounts 2018
Strategic report
The
expertise
behind informed
decisions
Driving innovation
in Financial Services
Lower interest rate trials Minimum payment changes
This year we’ve run several At the end of the first half we
risk-based variable interest rate reduced our minimum payment
trials, all in preparation for the full requirement from 5% to 4%.
rollout of variable APR with our We did this to give customers
new Financial Services systems. even more flexibility to manage
This new platform went live on their finances. We saw a significant
High & Mighty in July and will effect on Financial Services gross
be rolled out to our other brands margin, as a result of a better than
going forward, starting with expected reduction in the number
Fashion World in the second of customers getting into financial
half of FY19. arrears, a positive dynamic.
Our overall approach to credit
In late FY17 we introduced lower
customer risk management and
headline rates for new customers
lending remains unchanged.
on our Power Brands, which
continues to see encouraging
results. This year we also trialled Technological innovation
risk based pricing for a subset of We continue to innovate and use
existing credit customers to gain emerging technologies to further
learnings on customer behaviour improve our Financial Services
and outcomes before our full capabilities. Working with partners,
system is rolled out. we’re now trialling using virtual
interviews and utilising social data
to access richer information which
we could use for lending decisions.
We’ve also gone live with a trial
using Artificial Intelligence (AI) in our
credit and fraud decision making.
N Brown Group plc
Annual Report & Accounts 2018 9
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continued
The
energy
behind our
international
expansion
Our new approach is successfully
accelerating our growth in the USA
Focusing our marketing The launch of Global New international
investment on Ship Anywhere partnerships with
digital channels We’ve recently gone live with a Zalando, Navabi, Namshi,
We have served US customers technology solution which will enable Lamoda and THE ICONIC
for several years, under both the us to serve customers anywhere in the
Our partnerships involve us selling
Simply Be and JD Williams brands. world. This third-party solution allows
capsule collections of Simply Be,
This year we changed our marketing for currency and language translation
and in some cases Jacamo, through
approach in the country, significantly and is an important next step in our
other retailers’ sites. This allows us
reducing our use of paper and international ambitions.
to generate higher revenue and grow
mail order marketing techniques, our brand awareness whilst providing
and instead focusing on digital an important income stream of the
marketing channels such as social future. Last year we went live on
media, influencers and further ASOS and Tesco, and this year we’ve
investment in our online content launched on Zalando, Navabi,
and user experience. Namshi, Lamoda and THE ICONIC.
10 N Brown Group plc
Annual Report & Accounts 2018Jen
Strategic report
Rich
Arieta
Simon
Q: What role do you see
The people influencers playing in growing
US brand awareness?
driving our A: Arieta – Influencers, be they bloggers,
international vloggers or Instagrammers, are becoming
an increasingly important part of our
Q: W
hat will Global Ship
Anywhere give the business?
growth marketing mix. They provide us with
A: Jen – The release was an important
the opportunity to get huge reach
milestone for us as it opens the door to
and become part of our customers’
More detail p38 so many countries that we haven’t been
conversations. Working in partnerships
able to serve before. Using a third-party
with influencers provides us with a highly
solution improves the efficiency, and also
engaged and in-tune audience to spread
reduces the risk for us. We’re looking
the word of our brands. We try to make
forward to getting valuable insight into
sure that everyone we work with,
where in the world our brands resonate
whether they’re our models, stylists
best with customers, which will then
or photographers, is socially connected
enable us to invest more time and
with our customers.
efforts into these countries.
Q: Looking forward, what’s in store
Q: How are your partnerships
overseas in the coming year?
going, and how do you see this
A: Rich – This year was an opportunity area developing in the future?
to test marketing messages, channels
A: Simon – We’re really pleased with
and above all new content. We also
performance so far, and partners are
created our first bespoke collection
keen to work with us – plus size is one of
US specifically for our US customers. We
worked with specific US models and
influencers and created content that was
the fastest growing parts of the clothing
market globally, and we believe – and our
revenue shot, produced and created for the local
audience. In addition, it is important for
customers tell us – that we understand
fit better than anyone. Selling capsule
collections through partners is therefore
+21% in customers, influencers, celebrities and
members of the media to ‘touch and feel’
our product. With this in mind we will be
a win-win – they get a great plus-size
brand to offer their customers, and we
the second creating experiential activities that will
showcase our fashion credentials and
earn incremental revenue and grow
brand awareness. We’re delighted with
the partners we’ve started working with
half
Constant currency terms
demonstrate our expertise in fit.
over the past year and are speaking to
quite a few more, so I think this will
continue to be a growth area for us.
N Brown Group plc
Annual Report & Accounts 2018 11At a Glance
What we do
Power Brands
An online department store, offering style for 45-plus customers
and their families, with ranges for women, men, home and kids.
Focusing on shape and fits that flatter, we create unique silhouettes,
rather than scaling patterns; we use real bodies, rather than static
mannequins; we design our products to fit – a unique and age
appropriate point of view to empower women to feel their best.
REVENUE GROWTH (%) REVENUE PERFORMANCE (M)
3.2% £163.4m
Simply Be has empowered women for over a decade to express
their true selves through perfect-fitting style, whatever their shape,
whatever their size. The brand is gaining significant momentum
both here in the UK as well as in the US market.
REVENUE GROWTH (%) REVENUE PERFORMANCE (M)
16.3% £132.8m
A modern, challenger brand with a strong digital offer, Jacamo
wants men of all shapes and sizes to look good and to enjoy
fashion to express their own style. Collections are available
in a market-leading range of sizes, from Small to 5XL.
REVENUE GROWTH (%) REVENUE PERFORMANCE (M)
5.1% £68.6m
Revenue growth percentages are stated with reference to 2017 52 week numbers. See page 42.
12 N Brown Group plc
Annual Report & Accounts 2018Strategic report
We are structured in a matrix Our three Power Brands are our focus our efforts on the online channel
approach, buying by product growth engines; here we aim to gain within Traditional, and would expect the
new customers and grow market share. offline element to therefore reduce over
category and marketing by Our Secondary Brands are also in time. This will ensure that we continue to
brand. This allows us to run a growing markets, however they are offer customers a great product offering,
portfolio of brands effectively more niche and we therefore aim to whilst allowing us to generate efficiencies.
and efficiently. All of our brands grow share of existing customer spend.
Our Financial Services business operates
sell a wide range of clothing Our Traditional Segment has an online across all brands, with the younger brands
and homewares products. penetration of just under 40%, with online typically having a higher penetration of
growing as a channel and offline (catalogues) sales sold through credit.
declining significantly. Going forward, we will
Secondary Brands
Secondary Brands focus on distinct REVENUE GROWTH (%)
3.8%
customer niches which are not served
by our Power Brands. These brands
have significant customer loyalty, good
growth prospects and are increasingly
online. We view our Power Brands as REVENUE PERFORMANCE (M)
£149.2m
having the greatest growth potential
medium term, however, and therefore
our focus here is predominantly on
our existing customers.
Traditional Segment
The titles in this segment are focused REVENUE GROWTH (%)
3.3%
on serving our loyal, traditional and
typically more mature customers. These
customers tend to prefer paper-based
marketing, such as catalogues and
direct-mail offers. This is an attractive REVENUE PERFORMANCE (M)
£138.6m
and accessible market, underserved
by other retailers, and whilst not
a future growth driver we generate
a good financial return.
Financial Services
An important part of our overall proposition, strengthening customer REVENUE GROWTH (%)
3.5%
loyalty and enabling our retail business to thrive. In order to offer our
customers excellent convenience and flexibility, we allow customers to
either pay us immediately or utilise a credit account for their purchases,
spreading the cost of their purchases over time.
REVENUE PERFORMANCE (M)
£269.6m
Revenue growth percentages are stated with reference to 2017 52 week numbers. See page 42.
N Brown Group plc
Annual Report & Accounts 2018 13Chairman’s Statement
A year of significant
market share gains
Against a challenging
sector backdrop we
delivered a good set of
figures, with particularly
strong performances
from both Simply Be and
Financial Services. I would
like to thank all our
colleagues across the
business for their
continued passion
and dedication.
ANDREW HIGGINSON
Chairman
A STRONG POWER FINANCIAL SERVICES STRONG
BRAND PERFORMANCE: PERFORMANCE DRIVEN ONLINE METRICS:
BY ONGOING GOOD QUALITY OF
+8.0% +10%
THE CUSTOMER LOAN BOOK:
Revenue increase
+3.5%
Financial Services
Online revenue yoy
+2.4%
Increase in active
revenue
76%
Of all traffic from
customers mobile devices
All figures presented on this page are stated with reference to 2017 52 week numbers. See page 42.
14 N Brown Group plc
Annual Report & Accounts 2018Strategic report
Looking back on the year Reflecting on my time as Chairman
This year has seen the business make After serving nearly six years as Chairman, Welcoming
further good progress with the strategy I am stepping down in order to pursue
Angela put in place when she joined, with opportunities in Private Equity. The Board
Matt Davies
continued strong growth in the Power has recruited Matt Davies, who joined us as as Chairman
Brands, online penetration and market Non-Executive Director and Chairman Elect
shares. The backdrop remains challenging, in February, and will take over as Chairman
and was particularly competitive in the when I step down on 1 May 2018.
second half, and we are not immune to
Over the five years I have been with
this. Financial Services provides the Group
the Group it has been through an
with additional resilience, however, and this
unprecedented period of transformation.
can be seen in the financial performance
This change programme has not been
this year.
without its challenges, and there have also
Dividend been external shocks and legacy issues we
We recognise the importance of cash returns have needed to deal with along the way.
to our shareholders. Against a backdrop of
One of the biggest changes over the
continued investment in the business to
past few years has been in people, with
ensure future sustainable growth, we are We are delighted to welcome
the vast majority of both the Board and
pleased to be recommending an unchanged Matt Davies to N Brown. Matt is a
the Operating Board joining the Group
dividend on last year. first-class retailer and brings a wealth
over the past five years. This has been
of experience of retail and online
Board changes an important step forward in ensuring
businesses. He will be a strong
This year has seen further changes to that the Group has the expertise and
addition to the N Brown Board,
the Board, as it continues to evolve, in line experience to guide it on its path to an
bringing knowledge, leadership and
with the changing shape of the business. online retail model, driven by customers
customer focus. He has a proven track
As announced in last year’s report, Fiona but fuelled by technology.
record of value creation across retail
Laird stepped down from the Board in
There has been material people change and online.
January, following her appointment to
throughout the business, with many new
the Board of Newell Brands Inc in the USA. Matt was CEO of Tesco UK and ROI
colleagues joining, bringing new skills and
At the same time, I was very pleased to until the end of April 2018, having
capabilities. Much has been done to follow
welcome two new Non-Executive Board been appointed in May 2015. During
our customers as technology has changed
members, Gill Barr and Michael Ross. Both his time at Tesco he successfully led
the way people shop and interact with
bring with them very relevant expertise the turnaround of the UK business.
retailers. This affects everything in the
and knowledge, and have already added Prior to Tesco, Matt was CEO of
business from how we buy and source
valuable insight to the Group. Halfords from 2012 to 2015 and
product, to how we sell and distribute
Finance Director (2001-2004) and
Gill is a Non-Executive Director of to our customers. We have also made
CEO (2004-2012) of Pets at Home.
PayPoint plc and Wincanton plc, and a strides increasing the transparency of our
Trustee Director of Willis Towers Watson’s Financial Services business and obtaining
master trust, LifeSight Ltd. She is also the our full authorisation from the FCA.
Chair of the Customer Challenge Group
People change is never an easy aspect of any
for Severn Trent Water Plc. She was
business transformation and I would like to
previously Group Marketing Director
thank all colleagues for their passion, energy
of The Co-operative Group, Marketing
and dedication to the Group throughout my
Director of John Lewis and also spent
tenure. As the title of this report says,
“I am delighted and excited
time at Kingfisher Plc in a variety of to be taking on this role.
N Brown is truly ‘powered by people’.
senior strategy, marketing and business
development roles. I have thoroughly enjoyed my time at
I am really looking forward
N Brown. It has been a privilege to Chair to working with Angela,
Michael Ross is the Co-founder and Chief
Scientist of DynamicAction, a leader in big
the Group and I look forward to following her team and my fellow
its progress in the coming years under Non-Executive Directors to
data analytics and AI for retail. He is also
Matt’s excellent leadership.
a Non-Executive Director of Sainsbury’s further develop and grow
Bank, and sits on the commercial the N Brown business.”
development board at the Turing Institute.
He was previously the co-founder and Matt Davies
CEO of figleaves.com. Michael started his Incoming Chairman
career at McKinsey consulting in the early
Andrew Higginson
days of the internet.
Chairman
N Brown Group plc
Annual Report & Accounts 2018 15Market Review
Good performance
in a challenging market Macro-
economic
Global trends Demographic trends trends
The global economic backdrop remains Improvements in healthcare and lifestyle
High inflation
uncertain, with the transition and exit from are resulting in an ageing UK population,
the EU the biggest uncertainty at present. with 18% of the population aged 65+ leading to
Exiting the EU presents our business with according to latest figures from ONS. economic
some potential challenges, particularly in Obesity levels have steadily increased over pressures.
terms of reliance of EU workers through the last 15 years, and with latest reports
our distribution network. We are working from the Health Survey for England
to ensure that the impact to our customers showing the highest levels in 55-64 year
and our business is minimised as much olds, our size and age inclusive approach
as possible. are important differentiators which benefit
from these population trends. How we are responding
We continue to aim to mitigate
input costs as much as possible,
working closely with our suppliers
and moving supply nearer to the
UK in some cases.
We hedge our dollar buying
requirements on a rolling basis,
to give us clarity over our
buying rates.
Our International business
provides a small natural hedge
which is a key area of focus as one
of our strategic growth levers.
Trends
The market remains highly
competitive, with retailers facing
cost pressures from high inflation
as a result of the depreciation
of sterling following the EU
referendum, and households Online
carefully managing their
disposable income. The health Shopping globally
Retail
and beauty sector is expected is increasingly
to continue to see an uplift as
online; the British
consumers seek to find small,
Health and beauty gaining inexpensive luxury purchases. Retail Consortium
momentum in a highly estimates that over
competitive market. 20% of all non-food
retail spending now
How we are responding Opportunities for growth takes place online.
Continuing to invest in great We already benefit from strong
value products. customer loyalty, driven by our
fit specialism and, for some
Continuing to improve our health
customers, personal shopping
and beauty offering by partnering
account. The launch of delivery
with new brands.
subscriptions and other loyalty
drivers such as Simply Be Perks
should further strengthen
+60bps
customer loyalty. By increasing
How we are responding
our third-party brand and
product offering, we are widening Continuous improvements
Ladieswear market share share of basket to sectors which to customer experience, for
are seeing the biggest growth example through personalisation
and offering customers even and app development.
greater choice. Our new web platform will further
improve our trading agility.
16 N Brown Group plc
Annual Report & Accounts 2018More detail p39
Strategic report
Trends
Consumer spending has been
under pressure due to falling
real wage growth for some time,
and this is widely expected to Consumer
credit
continue. Inflationary pressures
Trends
remain across the retail sector.
Exchange rates have stabilised The retail credit market continues
somewhat since the EU Continuing to grow year-on-year, with data from
referendum however remain the Finance and Leasing Association
improvement revealing that the market grew by
unpredictable going forward.
in the quality 9% in 2017. The competition which
of our customer the retail credit market faces from
Opportunities for growth loan book. other lending products means we
are continuing to look at ways to
The introduction of the UK Living
improve our offering and innovate
Wage has resulted in some cost
within this space.
increases, particularly in our
distribution centre, however
unlike many of our competitors
Opportunities for growth
we don’t have a large store
estate, which puts us in a Ahead of our new Financial Services
relatively stronger position. Our system being rolled out across our
personal credit account facility How we are responding brands we have been trialling offering
enables customers to spread lower interest rates for new customers
Our new financial services system
the cost of their purchases over on our three Power Brands, which
will allow us to charge variable
time, which is a helpful customer has performed well. We are also
interest rates reflective of individual
service proposition, particularly continuing to optimise the customer
customers’ risk profile, which, in turn,
when real household incomes purchase journey, for both cash and
will make us more competitive in our
are under pressure. credit customers.
credit offering.
We constantly monitor the health
of our customer loan book, and have
seen the quality of the book improve
further this year.
Trends
Despite GlobalData reporting
that online growth will fall
year-on-year in the next five
Ethical sourcing SOURCING BREAKDOWN FY18
years, this is merely due to China
penetration saturating as the As a business our key territory still
UK
growth of online will see sales continues to be China, particularly
for homewares. For clothing, our India
making up over one fifth of the
retail market by 2023. Online buying trends are moving the mix Pakistan
expenditure for the clothing and closer to home. Bangladesh
footwear market is set to increase This enables improved in-season ROW
by almost 40% between 2018 and flexibility and planning, delivering Sri Lanka
2023, a promising outlook as our shorter lead times and providing key Turkey
online penetration increases. seasonal products to the customer Hong Kong
at the right time.
Excludes direct Thailand
dispatch products.
Opportunities for growth
As an online retailer, we continue
to make improvements to win
more share online and to further
improve the customer experience.
73%
demand was generated online
N Brown Group plc
Annual Report & Accounts 2018 17Business Model
Creating value
Inputs Core activities
Brand portfolio Retail products
We operate a trusted family of retail brands, Without great products we have nothing. Our fit
focused on fashion that fits. Our primary specialism, at great value for money, is our USP.
growth drivers are our Power Brands –
JD Williams, Simply Be and Jacamo.
We sell ladieswear, menswear, footwear,
homewares and gifting across our brands.
–– 3 Power Brands
–– Secondary Brands In-house
–– Traditional Segment Marketing
design team
£652.6m
Total brand portfolio revenue 2018
RETAIL
RETAIL
Engaged customer base
Strengthening customer loyalty and
gaining new customers is crucial for Sourcing and Quality
sustainable growth. We put the customer merchandising and fit
at the centre of every decision we make.
+3.6%
Active customers
N Brown people Financial Services
Without our people and relentless enthusiasm Our Financial Services offer enables customers
and passion we couldn’t do what we do. to spread the cost of their purchase over time.
They are our single most important asset.
2,600
People employed across the UK
Cash
customers Modernising
Systems and infrastructure our offer
Ongoing development and investment
in our systems and infrastructure remains
crucial against a competitive sector. Our IT FINANCIAL
investment approach this year has been to
prioritise and focus on the developments
that deliver the highest returns, such as
Global Ship Anywhere and mobile apps.
76% (+5ppts) Credit
customer base
Traffic from mobile devices
18 N Brown Group plc
Annual Report & Accounts 2018– Glow with pride
Strategic report
– Understanding is everything
GUSTO shapes our culture. GUSTO celebrates – Saving makes sense
positive attitudes and behaviours. GUSTO is – Togetherness is crucial
how we do things around here. – Opportunity exists everywhere
Value Financial outputs
More detail p22
Retail products Value back to shareholders
Our shareholders are very important to us, and we
value the support and input they give us. We are More detail p34
£652.6m focused on a progressive dividend policy.
Total product revenue 2018
14.23p
+4.1%
Dividend to shareholders
Increase in revenue
Value back into business
to drive future growth
We invest into our business to ensure that we can drive
profitable, sustainable growth in the years ahead.
Percentage
of product
revenue £39.2m
Capex in 2018
JD Williams 25% Non-financial outputs
Simply Be 20%
Jacamo 11%
Secondary Brands 23% Customer satisfaction
Traditional Segment 21% We’re proud to make great products that people
love. Our clothes generate a feel-good factor for
our customers.
Financial Services
Responsibility
We believe we should be a major force for good as
£269.6m
Total Financial Services
well as a major force in fashion. It’s a huge responsibility,
and a purpose way beyond profit.
revenue 2018
+3.5%
Increase in revenue
All People
Dignity and
respect through
Every
Product
Responsible
people
One Planet
Ways of working
Revenue growth percentages are stated with reference to 2017 52 week numbers. See page 42.
N Brown Group plc
Annual Report & Accounts 2018 19Chief Executive’s Review
Focused on our
growth strategy
Our strategy continues
to deliver results, with
market share gains in the
UK, US revenue up 21%
in the second half, new
partnerships underway
and almost three quarters
of our revenues now
coming online.
ANGELA SPINDLER
Chief Executive
KEY HIGHLIGHTS:
+17%
Power Brand online
+21%
US H2 revenue growth,
revenue growth constant currency
Revenue growth percentages are stated with reference to 2017 52 week numbers. See page 42.
20 N Brown Group plc
Annual Report & Accounts 2018Strategic report
Overview performance. We are targeting the Growth levers
We continue to benefit from the significant second half of FY19 for Fashion World to
changes made to the business over the migrate onto the new platform. We will Gain share in the UK
We are focused on continual improvement
past four years, and these, together with optimise the timing of these migrations
in our customer experience, further
a strong performance in our Financial to mitigate any commercial risk.
development of our product offer and
Services business, enabled us to deliver a enhancing our brand cut-through. This
At the start of the new financial year we
good performance for the year as a whole, growth lever is further driven by increasing
went live with Global Ship Anywhere. This
in a challenging market. the number of third-party brands on our
is the key enabler for wider international
websites, many of which are extended to
I am delighted to be reporting profit growth outside of our current US and
larger sizes on an exclusive basis, offering
growth, with Simply Be the standout Ireland sites. This functionality translates more choice to our customers.
brand. The second half in particular was currency and overlays our site with local
During the year we gained market share in
difficult for the fashion sector. A good delivery and payment options.
the UK in both ladieswear and menswear.
performance in Financial Services We continue to improve the flexibility of
We have seen some encouraging results
provided the Group with resiliency to our supply chain, reducing lead times and
with our Simply Be iOS and Android
enable us to continue to invest in our our speed to market. Our websites offer
apps, with over 100,000 downloads
customer offer, successfully driving customers a wide range of brands, allowing
across both platforms. Update releases
revenue and market share growth. them to shop for every occasion; we have
to our apps have enabled us to continue recently added brands including Monsoon,
Power Brands continued to outperform, to improve our offering, including Quiz, Jack & Jones, Ted Baker, Lyle & Scott,
with revenue up 8.0%. Within this, features such as recently viewed items Radley and Superga.
JD Williams revenue was up 3.2%. There and predictive search, further improving
International expansion
was a headwind from migrated Fifty Plus the experience for our customers. Our The USA is our first priority, however, we
customers; excluding these, JD Williams App store rating is currently 4.8 out of 5. also intend to expand to other countries,
revenue was up a double-digit percentage. In February, we launched the JD Williams initially through Global Ship Anywhere
Simply Be was up 16.3% and Jacamo up app; our first in-house developed app, technology, which recently went live.
5.1%. We saw a good performance across an important step in bringing our app In order to achieve our international
all categories, with Footwear and development capabilities in-house. ambitions we will leverage our current
Accessories a standout performer. By investing in our in-house development organisational capabilities and embed
capabilities we can embed fortnightly a global culture throughout our business.
We continue to deliver strong online US revenue accelerated through the year,
releases to improve the functionality and
metrics, with online revenue up 10% growing by 21% in the second half, driven
features of our apps and plan to roll out
and online revenue of Power Brands by our new digital-first marketing approach
apps onto our other brands in the future. and enabled by our new web platform.
up 17%. Online penetration was 73%,
up 4ppts, with 76% of all traffic coming Outlook Partnerships
from mobile devices. The market backdrop remains This includes selling capsule ranges on
challenging and as competitive as ever. other retailers’ sites, on both a wholesale
We had a strong Financial Services and marketplace basis. We also see a
We will continue to invest in our product
performance, driven by continued significant growth opportunity in influencer
proposition and service offering, to
improvement in the quality of the loan marketing, working together with bloggers
ensure we further strengthen customer
book, together with a reduction in and opinion formers to enable our brands
loyalty. We have an industry-leading fit
arrears, partly as a result of minimum to reach new audiences and further
specialism and market leading position strengthen customer engagement.
payment changes.
in our plus-size niche. We will continue to
During the second half we went live on
Technology and innovation work with passion, energy and relentless
ASOS and Zalando, and have recently signed
Our systems investment programme focus to further build on this position. partnership deals with THE ICONIC (Australia)
remains on track. We are pleased with the and Lamoda (Russia). All of our partnerships
performance of the High & Mighty and US involve us selling capsule collections of our
sites, which are both on the new Hybris brands on our partners’ sites. We are pleased
platform. Since the sites go-live we have with the performance to date.
Angela Spindler
been releasing regular updates to add We have increased our use of influencer
Chief Executive
further functionality and optimise marketing, most notably in the USA.
These activities have been very successful
in strengthening our customer relationships,
Our strategic drivers: increasing our share of voice and driving
sales. Examples of recent influencer
Product People
collaborations include Sarina Novak
Fantastic quality and fit fashion, home Obsessed with customers, enriched (@SarinaNovak; 372k followers) who worked
ranges, and relevant financial services with data and powered by technology with us on the Simply Be USA relaunch,
Price Place La’Tecia Thomas (@lateciat; 806k followers)
for our Swim and Spring Break campaigns
Great prices and flexible ways to pay Whatever you want, wherever you are,
and Kelly Augustine (@kellyaugustineb;
whenever you want it, we make it easy
63k followers) for our Valentine’s Day activity.
N Brown Group plc
Annual Report & Accounts 2018 21Our Strategy
Four drivers
of success
Relevance
Great product is the lifeblood of our business – it is the
absolute core of what we do.
Progress 2017
We strive to continuously improve our product offering,
both in terms of our retail and Financial Services products.
All product categories saw positive revenue growth, a
Product
good result, with Simply Be the standout brand. We have
continued to invest in our product design capabilities, and
are also moving to 3D product fitting to further improve
Fantastic quality our fit specialism.
Our vision and fit fashion,
home ranges,
Priorities 2018
We will roll out 3D fitting across womenswear, cementing
our differentiated position. Menswear delivered a good
To be the globally and relevant performance however we see scope for further growth in
loved experts in financial services this category. In Financial Services, we plan to go live with
full variable APR in the second half, a significant milestone.
fashion that fits. Associated risks
• Failure to change
• Competition
• Regulatory environment
Our mission KPIs
We’ll do this by helping 5.6% 2.7% 27.1%
Ladieswear Menswear Group returns
our customers look and market share, market share, rate (rolling
size 16+ chest size 44”+ 12 months)
feel amazing through
our trusted family
of fashion brands. Relevance
Value and convenient ways to pay are both as important
to customers as they have ever been.
Progress 2017
The second half of the year saw a challenging retail market
backdrop. The strong performance of Financial Services
allowed us to strategically choose to invest more than
Price
initially planned in promotions during this period,
successfully driving both revenue and market share.
Great prices Priorities 2018
We continue to ensure that our price points are
and flexible competitive with the mid-market, offering great value
ways to pay products throughout the size range. In Financial Services,
our new platform will give customers more flexible,
personalised payment options.
Associated risks
• Failure to change
• Competition
KPIs
85.8% 122k
Customer New credit
satisfaction recruits (Rollers,
rating, UK CSI last six months)
KPIs on this page are stated with reference to 2017 52 week numbers. See page 42.
22 N Brown Group plc
Annual Report & Accounts 2018Strategic report
Relevance
Without our people and their relentless enthusiasm and
passion we couldn’t do what we do. They are our most
important asset.
Progress 2017
We continued to develop our internal talent and hire
great new people to our business. We launched our
People
new intranet and an online leadership development
hub. Our colleague satisfaction rating reached another
record high.
Obsessed with Priorities 2018
customers, We will continue to focus on developing our talent,
enriched with rewarding achievement and instilling a global culture
throughout the business.
data and powered
Associated risks
by technology • People
• Competition
KPIs
85.8%
Customer satisfaction
rating, UK CSI
Relevance
Customers shop how and when they want, and it is our job
to exceed their expectations.
Progress 2017
Our speed of delivery improved further, by over 15% year
on year. We rolled out delivery subscription offers across
our largest five brands, with positive customer reception.
Place
We launched our new web platform in the UK for the first
time, on our High & Mighty site, an important milestone.
Priorities 2018
Whatever you We will continue the rollout of our new web platform, with
want, wherever Fashion World migrating in the second half. We recently
you are, whenever went live with Global Ship Anywhere, an important
enabler for our international growth ambitions.
you want it, we
Associated risks
make it easy • Failure to change
• Competition
• People
• Cyber security
KPIs
73% 5.3% 4.45m
Online Conversion Active customer
penetration rate accounts
KPIs on this page are stated with reference to 2017 52 week numbers. See page 42.
N Brown Group plc
Annual Report & Accounts 2018 23Key Performance Indicators
Measuring progress
against our strategy
Customers
ACTIVE CUSTOMER POWER BRAND ACTIVE GROWTH OF OUR MOST CUSTOMER SATISFACTION
ACCOUNTS (m) CUSTOMERS (m) LOYAL CUSTOMERS (%) RATING (%)
+3.6% +2.4% -380bps +210bps
2017 4.30m 2017 2.17m 2017 +3.6% 2017 83.7%
2018 4.45m 2018 2.22m 2018 -0.2% 2018 85.8%
Relevance to strategy Relevance to strategy Relevance to strategy Relevance to strategy
Definition Definition Definition Definition
The number of customer The number of Power Brand We define our most loyal Our latest overall customer
accounts which made a retail (JD Williams, Simply Be and customers as those who have satisfaction score, as measured
purchase in the last 12 months. Jacamo) customer accounts purchased from us in each of independently by the UK
The figures include all brands which made a retail purchase the last four clothing seasons. Customer Services Institute.
aside from Figleaves, which in the last 12 months.
is managed separately to
the Group.
Performance Performance Performance Performance
We saw a good performance As with the revenue After a very strong performance Our most recent rating was
in customer metrics, with a very performance, Simply Be was the last year, driven by the recovery 85.8%. This places us second-
strong first half, and then a standout performer, with active in our Traditional segment, highest in the non-food retail
softer second half against customer growth of over 20% the number of our most loyal sector, behind only Amazon.
both a tough comparative and The migration of the Fifty Plus customers was broadly flat Our score is almost 4ppts higher
competitive backdrop. In line title into the JD Williams brand year on year. Given the difficult than the retail sector average.
with our strategy we continue (these customers are included comparatives, and a challenging
to prioritise new customer within the JD Williams customer trading backdrop, particularly
recruitment to our Power file) was a headwind to this in the second half, this is a
Brands, as they represent metric, as expected. solid performance.
our biggest future growth
opportunity.
Outlook Outlook Outlook Outlook
We will continue to attract new The conversion rate of recently Further strengthening customer Customer satisfaction is driven
customers to our business migrated Fifty Plus customers loyalty is a key business focus. by a wide range of factors, such
through our product offering, has been below expectations, We do this by a continuous as product quality, our value for
marketing campaigns and due to the more conservative improvement approach to our money, our service proposition
customer service proposition. fashion choices of this group. product offering, service and and how we respond when
Actions are being taken to delivery proposition. Recent things go wrong. We interact
address this, primarily through launches such as delivery with our customers through a
website personalisation, and the subscriptions and the Simply Be variety of channels every day to
early signs are encouraging. We loyalty scheme are both designed ensure we are doing the best job
therefore expect this headwind to further strengthen loyalty. we can to delight our customers.
to reduce in FY19.
Risk Risk Risk Risk
• Failure to change • Failure to change • Failure to change • Failure to change
• Competition • Competition • Competition • Competition
• People • People • People
• Business interruption • Regulatory environment
KPIs on this page are stated with reference to 2017 52 week numbers. See page 42.
24 N Brown Group plc
Annual Report & Accounts 2018Strategic report
Key to Strategic Drivers
Product Product
LADIESWEAR MARKET MENSWEAR MARKET SHARE GROUP RETURNS RATE Price
SHARE SIZE 16+ (%) CHEST 44"+ (%) (ROLLING 12 MONTHS) (%)
People
+60bps +30bps +30bps Place
2017 5.0% 2017 2.4% 2017 26.8%
2018 5.6% 2018 2.7% 2018 27.1%
Relevance to strategy Relevance to strategy Relevance to strategy
Definition Definition Definition
Our market share in UK Our market share in UK The amount, measured in value,
Ladieswear, in size 16 and Menswear, in chest size 44" and of products which are returned
higher. Market share is higher. Market share is calculated to us by customers, over the last
calculated using internal and using internal and Kantar data, 12 months.
Kantar data, and these figures and these figures relate to the
relate to the 52 weeks ending 52 weeks ending 11 February.
11 February. Last year’s figure has been
restated; on review they
understated our market share.
Performance Performance Performance
Against a challenging market Against a challenging market We saw a slight increase in our
we were pleased to grow our we were pleased to grow our returns rate, after several years
market share. This performance market share. This performance of declines. The main driver of
was driven by Simply Be. was driven by Jacamo. this was the relative performance
of womenswear, together with
the increase in participation of
sub-categories such as third-
party brands and occasionwear,
as these all naturally incur higher
returns rates. These factors were
partially offset by the ongoing
increase in the proportion of cash
customers, as these customers
naturally have a lower returns rate
than credit account customers.
Outlook Outlook Outlook
The trading backdrop remains We continue to see an Our returns rate remains below
challenging. Against this, it is opportunity to grow our market the industry average, and over
important that we focus on our share in menswear age 45 and the medium term is linked with
fit USP, ensuring that we continue above, through the menswear customer satisfaction of our
to offer customers the best offering within JD Williams. product offering, including fit,
choice of products to fit and quality and value for money.
flatter them, whatever their size.
Risk Risk Risk
• Failure to change • Failure to change • Failure to change
• Competition • Competition • Competition
• People • People
KPIs on this page are stated with reference to 2017 52 week numbers. See page 42.
N Brown Group plc
Annual Report & Accounts 2018 25Key Performance Indicators
continued
Online
ONLINE PENETRATION ONLINE PENETRATION CONVERSION RATE TRAFFIC FROM MOBILE
(%) OF NEW CUSTOMERS (%) (%) DEVICES (%)
+4ppts +4ppts -30bps +5ppts
2017 69% 2017 77% 2017 5.6% 2017 71%
2018 73% 2018 81% 2018 5.3% 2018 76%
Relevance to strategy Relevance to strategy Relevance to strategy Relevance to strategy
Definition Definition Definition Definition
The percentage of sales, The percentage of sales from The percentage of website The percentage of our total
excluding stores and new customers, excluding stores sessions which result in an order online traffic which comes
International, which comes and International, which comes being placed. from either a smartphone
to us online. Our second to us online. or a tablet device.
largest channel is through
our contact centre.
Performance Performance Performance Performance
Online penetration was 74% in This metric now exceeds 80%, At 5.3% our conversion rate Mobile devices include both
the second half, and for the year demonstrating the online nature remains materially above the smartphones and tablets; of
as a whole online revenue was of our business. By brand, industry standard. The ongoing these, smartphones remain
up 10%. Some customers are JD Williams again saw the most increase in mobile devices as a the device of choice for
unlikely to ever migrate online; significant increase, from 80% proportion of traffic represents customers, with web sessions
we estimate that these account to 95%. a drag on overall conversion here increasing by 44% to
for roughly half of the non- rates; we were pleased to drive account for 54% of all traffic.
online proportion. an increase in the conversion
rate for smartphones year
on year.
Outlook Outlook Outlook Outlook
We continue to invest in both Our new customer recruitment The continued increase in share We adopt a ‘mobile first’
our online platform, through campaigns focus primarily on from mobiles represents a drag approach to all of our digital
both systems investments and online shoppers, and within our to the overall conversion rate. improvements, and expect the
in hiring and developing digital brand portfolio we continue We are focused on increasing trend of customers shopping
talent. The online penetration of to prioritise our three Power the conversion rate of each more and more on their
new customers is an important Brands, which are all device type. smartphones to continue.
leading indicator for overall predominantly online. We During the year we upgraded our
future penetration. would therefore expect this Simply Be app and launched new
metric to continue to increase Simply Be USA and JD Williams
looking forwards. apps. We also continue to drive
further improvements in mobile
optimisation through our
in-house digital marketing team.
Risk Risk Risk Risk
• Failure to change • Failure to change • Competition • Competition
• Competition • Competition • People • People
• People • People • Cyber security • Cyber security
• Cyber security • Cyber security
KPIs on this page are stated with reference to 2017 52 week numbers. See page 42.
26 N Brown Group plc
Annual Report & Accounts 2018Strategic report
Key to Strategic Drivers
Financial Services Product
ARREARS RATE PROVISIONS RATE NEW CREDIT RECRUITS Price
(>28 DAYS) (%) (%) (ROLLERS)
People
-120bps -330bps -5% Place
2017 9.9% 2017 10.8% 2017 129,000
2018 8.7% 2018 7.5% 2018 122,000
Relevance to strategy Relevance to strategy Relevance to strategy
Definition Definition Definition
Arrears over 28 days are defined Closing bad debt provision The number of new customers
as customer debts with two or as a percentage of gross opening a credit account and
more missed payments. trade receivables. rolling a balance in the last
six months.
Performance Performance Performance
We saw another strong The provision rate was 7.5%, Although over the long term
performance in arrears rate, down 330bps versus last year. we aim to increase new credit
down 120bps year on year As in FY17, this benefited from rollers, the key enabler of this will
against a 100bps decline in the the sale of some high risk be our new Financial Services
prior year. This was driven by payment arrangement debt, products which are not yet fully
the continued improvement which we were able to sell for live. We saw growth in this
in the quality of our customer a slightly better rate than book metric during the first half, and
loan book, together with the value. It also benefitted, to a then a decline in the second half,
reduction in our minimum lesser extent, from the minimum due to the wider challenging
payments, which had a positive payment changes and the market backdrop. For the year as
effect on the number of underlying improvement in a whole we added 257,000 new
customers going into arrears. the quality of the book. credit rollers, an increase on the
prior year.
Outlook Outlook Outlook
We expect a broadly steady IFRS9 comes into effect in FY19, We continue to trial variable
arrears rate over the coming year. which will significantly change interest rates for new
our provision rate accounting. customers; the results of these
You will find more details on this trials to date are encouraging.
within the Financial Review on
page 43.
Risk Risk Risk
• Failure to change • Failure to change • Failure to change
• Competition • Competition • Competition
• People • People • People
• Cyber security • Regulatory environment • Regulatory environment
KPIs on this page are stated with reference to 2017 52 week numbers. See page 42.
N Brown Group plc
Annual Report & Accounts 2018 27You can also read
