Berenberg cuts N Brown target price
Analysts at Berenberg cut their target price on 'hold' rated N Brown on Wednesday, saying the retailer's operational performance over the last few months was not going "in the same direction" as it had when the firm's strong run began at the start of 2019.
A trading update from the company last week saw the shares tumble after adjusted pre-tax profit guidance for both 2020 and 2021 was cut from roughly £83m to £70m-72m. Berenberg said N Brown was "clearly" facing several significant headwinds.
Berenberg said a difficult retail backdrop was hurting both N Brown's top line and gross margins of products, while regulation was starting to impact financial services and recent exceptional costs had left the balance sheet leveraged.
The German bank took the midpoint of N Brown's revised guidance for each variable, with the exception of costs, which it noted management had been able to manage well historically, and now assumes the group can reduce costs by 7.5% and for 2020 adjusted pre-tax profits to be £68m and earnings per share 19p.
"We think there is a higher likelihood that numbers continue to be reduced in the short to medium term, so would prefer to see signs of improvement before turning more positive," said Berenberg.