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Investors lukewarm about Briscoes Christmas miracle

Monday 11th February 2019

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Retailer Briscoe Group has delivered a solid fourth quarter performance, despite a tough pre-Christmas period for the sector. It's predicting another full-year of profit growth - which would make it the ninth in a row.

But investors remain ho-hum about the stock.

Briscoe Group, which owns the Briscoe's homewares and Rebel Sport chains and a minority stake in outdoor chain Kathmandu, reported a 5.8 percent rise in fourth quarter sales and same-store, or stores open 12 months or more, growth of 5.1 percent.

Net profit after tax for the year ended Jan. 27 is expected to be around $63 million - a new high, Briscoe Group managing director Rod Duke said. Annual group sales were $631.9 million, up 4.4 percent on last year, and gross profit margin is expected to be up slightly.

Duke said bad weather before Christmas had been “challenging” for retailers, both in terms of people buying homewares gifts, and summer sportswear.

“It’s been a little difficult, but we’ve come through it. Full year, it’s been a record for sales and profitability."

Online sales were up 27 percent on the 2017 year, Duke said.

“We’ve been thrilled with our online business. We’re hitting a new customer base, selling into spots where we haven’t got shops.”

Online revenues in are now 9.5-10.5 percent of total revenues, Duke said.

“I didn’t expect it to be so fast.”

Carolyn Holmes, head of equity research at financial service provider ShareClarity, has been covering Briscoes for several years. She says that doing well in a challenging market is a testament to Duke’s many years of retail experience.

And next year could be another “interesting” one, Holmes says. A weakening dollar will make importing more expensive, and any slowdown in the economy will hit the company’s customers.

“The Briscoes store market is related to people replenishing their homes; the Rebel Sport spend is also discretionary. However, Rod Duke does a good job. He’s been through these cycles before.”

However, a series of record-breaking results - this could be the ninth in a row for Briscoes Group - isn’t impressing investors. Duke himself owns 78 percent of the company, meaning trading isn’t particularly liquid, but the share price has gradually headed south since highs of $4.50 in March 2017.

Today’s positive result saw the stock edge up 1.5 percent, or 5 cents, to $3.29.

Holmes says Briscoe Group is vulnerable because it’s a retail stock.

Duke says it’s frustrating that retail is out of favour, and other companies have been hit too - the Warehouse’s share price fell 30 percent in 2017 and hasn’t recovered, and Michael Hill International is worth only a third of what it was in early 2017, though with more fundamental reasons for the fall.

Would Duke consider leaving the stock market altogether?

Maybe one day, he says, but it’s not on the cards at the moment.

“When we listed in 2001, we needed access to capital. But now we’ve got money in the bank. If the current situation, where we had plenty of money in the bank and we didn’t need capital, delisting would be a question we would have to ask ourselves." For example, Briscoe could have another go at buying Kathmandu.

“But right now we are very happy to be listed. Delisting is not on the agenda.”


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