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Daily ShareChat: Briscoes

By Jenny Ruth

Friday 24th September 2010

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 Jenny Ruth

Briscoe Group's first-half results show it is faring well in difficult times, says Sarndra Urlich, an analyst at First NZ Capital.

Adjusted net profit was up 42.2% at $9.3 million while its profit margin slipped to 39.9% from 40.3% in the previous first-half. The company attributed the small decline to unfavourable seasonal conditions and generally tight macro and competitive industry conditions.

"Briscoe's story continues to be one of driving profitability without relying on substantial top-line sales growth," Urlich says.

The latest result "was certainly not a sales leverage story with Briscoe's managing to grow its earnings in the order of 40%$ by focussing on the cost line, both at the store and corporate level," she says.

The retail sector remains "fragile and unpredictable" and the company commented that increased promotional activity seen in the first half continued into the second half.

"From a sentiment perspective, it is difficult to feel positively inclined towards stocks that are exposed to the retail sector," Urlich says.

"That being said, we believe that Briscoe's is faring better than most, given the current challenging backdrop."

When macro conditions do finally pick up, Briscoe's will be well-placed to exploit those conditions, she says.

Recommendation: outperform.

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