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Briscoe first-half profit tumbles 71% as margins shrink

Friday 5th September 2008

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Briscoe Group, owner of the homeware Living & Giving, Urban Loft and Rebel sports outlets, reported a 71% slump in first-half profit as retailers cut prices to woo consumers, eroding their margins.

Profit fell to NZ$3.1 million, or 1.43 cents a share in the 26 weeks ended July 27, from NZ$10.5 million, or 4.89 cents a year earlier, the company said in a statement. Sales fell 4.4% to NZ$182 million.

The results are at the top end of the NZ$2 million to NZ$3 million range the retailer cut its forecast to in June and reflect weak consumer confidence in a shrinking economy, it said today. Managing director Rod Duke predicts some recovery in the second half, with profit similar to the NZ$11.9 million it earned in the same period last year.

"The widely reported downturn in consumer confidence affected by steep increases in basic cost of living, petrol and bank interest rates, has hit retailers hard," Duke said. "Consumers are watching what they spend very carefully."

The shares were unchanged at 93 cents and have dropped 38% this year, lagging behind the NZX 50 Index's 20% decline. The company will pay an interim dividend of one cent a share, down from 3.5 cents a year earlier.

Briscoe's gross margin percentage declined to 39.39% from 41.02%, reflecting price cuts during promotions and weaker consumer demand, it said.

Same-store homeware sales fell 4.6% while sporting goods sales fell 14.1%. Inventory levels at July 27 were NZ$65.2 million, up from NZ$64.9 million a year earlier, which the company said reflects a high level of control of inventory as it opened eight new stores.

"We believe the group is well placed to perform better in the second half of the year," Duke said. "Inventories have been carefully managed and costs continue to be controlled closely."

By Jonathan Underhill

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