We upgraded N Brown to Buy 5 weeks ago and Autumn trading conditions since then have been favourable. With execution risk beginning to moderate, unseasonal weather is the single biggest risk, so growth in the clothing market in Sept is clearly supportive. Comps now weaken in Oct/Nov. N Brown has thus far failed to deliver its ambitious growth plan and FY’16E PBT is 5% below FY’13A, driven partly by lower EBIT margins (-160bps) vs. a core objective to lift them. The P/E also sits at a c25% sector discount now. However, this could all be about to change and, with a potential inflection point ahead, N Brown graduates to become a conviction idea for Q4.
