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Briscoe posts another record profit, bolstered by asset sale, Kathmandu divvy

Tuesday 14th March 2017

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Briscoe Group lifted annual profit 26 percent to deliver another record profit as the homeware and sporting goods chain bolstered fatter margins with a gain on the sale of a Hastings property and dividends from Kathmandu Holdings.

Net profit rose to $59.4 million, or 26.5 cents per share, in the 52 weeks ended Jan. 29 from $47.1 million, or 21.2 cents, a year earlier when its balance date included an extra week, the Auckland-based retailer said in a statement. The retailer widened gross margins to 41.07 percent from 40.49 percent in 2015 and 38.9 percent the year before, which managing director Rod Duke said reflected Briscoe's focus on inventory and promotion management.

"The relatively late start to summer and unsettled weather patterns in most parts of the country made the selling of seasonal products a little tougher, but by identifying the issues quickly and holding our nerve, we have sold through seasonal stocks at an acceptable rate, protecting both margin and our closing inventory position," Duke said.

Duke gave guidance for a 25 percent uplift in annual profit last month when reporting on Briscoe's fourth quarter sales, saying at the time that the retailer made an early decision "to protect gross profit and profitability by resisting the temptation to unnecessarily chase profitless sales".

Briscoe's board declared a final dividend of 11 cents per share, payable on March 31, taking the annual payout to 18 cents, up from 15.5 cents last year and 14 cents the year earlier.

Duke said retailing is still a tough environment with a number of rivals struggling, but that Briscoe is still "cautiously optimistic" about the upcoming year.

Rival Warehouse Group, now eclipsed by Briscoe's market capitalisation, last week reported a 76 percent slump in first-half profit as it booked an impairment charge against its financial services unit, faced restructuring costs, and saw gross margins shrink 70 basis points to 32.2 percent across its group.

Briscoe shares, of which Duke owns more than three-quarters, last traded at $4.39 and have gained 8.9 percent so far this year. That values Briscoe at $963.7 million, compared to $863.6 million for Warehouse, which was recently up 0.4 percent to $2.49.

Briscoe's bottom line was also bolstered by $4.4 million in dividends from its 19.9 percent stake in outdoor equipment chain Kathmandu. Duke said he's watching "Kathmandu's performance closely as they seek to restore historical levels of profitability.

" Kathmandu's board rebuffed a Briscoe takeover offer in 2015, offering five of its own shares for every nine Kathmandu shares plus 20 cents cash, which at the time was an implied offer of $1.80 a share. Kathmandu's shares were recently up 1.6 percent to $1.94, and Briscoe valued the stake at $76.6 million at the Jan. 29 balance date, up from $60.9 million a year earlier.

Briscoe increased online sales by more than 40 percent, and they accounted for 6 percent of the retailer's $582.8 million in revenue.

The company is rolling out a simplified programme to interact with customers to more stores after it was successful at a small number of outlets, and its Rebel Sport merchandising team is working closely with suppliers to battle increased competition.

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