N Brown, the catalogue and online clothing retailer, which specialises in women with fuller figures, unveiled an acceleration of sales growth in the past nine weeks to the end of June but provided little reassurance on bad debts.

Sales growth was 12.3 per cent in the six months to the end of last week, helped by a sunny spell in May. This compares to 12.1 per cent growth in the eight weeks to April.

But the gross margin slipped 0.8 per cent in the last nine weeks, much worse than the 0.4 per cent fall in the previous two months and Lord Alliance, the chairman, said bad debt figures were included in the gross margin calculation.

He said the amount of customer bad debt "is currently within management's expectations." He blamed the margin fall at the gross level on a growing proportion of less profitable customers and products from burgeoning online sales but said that cost savings meant the net margin was almost stable.

N Brown's shares have fallen 25 per cent since rival online retailer Findel warned in April of rising bad debt amongst its customers to whom it extends credit. This morning in early trading they gained 3 per cent or 5.25p to 188.25p.

Oriel Securities analyst Jonathan Pritchard maintained hold advice saying: "We fear that the bad debt charge has worsened and the market will hate that." He added: "Given the company's exposure to debt and the credit markets, the shares are unlikely to perform from here.

Lord Alliance said Menswear was the fastest growing product category although ladieswear sales have also been very encouraging, with customers particularly attracted by the new branded and celebrity designer ranges. It has also managed to increase prices of home and leisure sales, helping raise the average value of all items purchased by 5 per cent.

Lord Alliance said: "The group's financial position remains strong although the board is acutely aware of the economic factors which could impact on customers' discretionary spending.

"However we continue to believe that the age and demographics of our customer base, coupled with the strength of our specialist product propositions and the enhancements to our websites, will deliver further progress in the remainder of the financial year."

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts