Briscoe still a buy for betters

Friday 15th November 2002

As the economy shows signs of slowing down some investors have begun to wonder whether retailer Briscoe's shares are looking a little overpriced.

Those who bought into the float have seen a 140% return on their investment in one year, excluding dividends, but other "growth" stocks such as Baycorp have been hit hard by weak investor confidence.

Briscoe last week reported an impressive lift in October third-quarter sales. The homeware group's same-store figure rose 18.3% and Rebel Sports did only a little less well.

National retail sales data are mixed. In the Waikato and the South Island sales fell in August and September but Auckland and Wellington are still strong, with migration flowing into high housing activity and strong demand for homeware and furnishings.

UBS Warburg analyst Malcolm Davidson believes share price doubters are underestimating Briscoe's earnings growth potential and rates the stock a "buy."

The higher same-store sales pointed to margin expansion and he expected more to come. The company was also beginning to benefit from the higher New Zealand dollar and the Christmas season was shaping up to be the best since the mid-1990s. Even if retail spending softened, he said, the company could still grow by rolling out stores.

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