Daily ShareChat: Briscoes

Briscoe Group's 2% decline in same-store sales in the three months ended August 1 was its first quarterly decline since early 2009 and was driven by falling sales through its homewares chain, partly offset by modest sales increases through its Rebel Sport stores, says Buffy Gill, an analyst at Goldman Sachs JB Were.

“Trading conditions in the quarter were impacted by a late start to winter as well as difficult general conditions across the retail sector,” Gill says. “Despite this, Briscoes in fact continued to gain market share in its key categories during the period.”

While the company has benefited from a higher average New Zealand dollar against the US dollar, making its wholesale purchases cheaper, it has used this to implement additional discounting, Gill says.

The sales decline highlights how difficult the retail sector is “with a weary consumer combined with continued competitive promotional activity putting a cap on margins,” she says.

While previously Briscoe's had been able to deliver positive sales and earnings growth despite the difficult backdrop but, with sales softening, there are limited further stock-specific catalysts on the horizon.

Briscoes still looks cheap compared to both its peers and its historical discount to Gill's $1.80 discounted cashflow valuation, unchanged from before the sales data was released, but she has revised her 12-month share price target down to $1.35 from $1.60 previously.

Recommendation: Hold (revised from buy).

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