A warm winter, increasing competition, poor sales and subsequent high stock inventories have put The Warehouse, Pumpkin Patch and Kathmandu under the blowtorch, delivering either lacklustre or downgraded results.
Briscoes group managing director Rod Duke said the increased gross profit margin for the year to January 25 reflected continued focus on inventory management, new stock receipting technology, continued product range refinement and benefits from the New Zealand dollar.
Following the full-year announcement yesterday, shares in Briscoes were unchanged at $2.95, having gained 15.23% during the past year.
Brokers at Craigs Investment Partners and Forsyth Barr described the result as ''strong'' and with a good outlook, but there was some caution about the New Zealand dollar movements and saturation point for shop numbers.
Mr Duke said: ''Other factors that were central to these gross profit margin increases were the overall management of inventories, the effectiveness and aggressiveness of our buying and marketing, and the ongoing improvements in the quality of the shopping experiences for customers.''
He said while while many commentators were talking up the outlook for New Zealand's economy, he anticipated a continuation of recent challenges for retailers, but was ''cautiously optimistic'' on the year ahead for Briscoes Group.
''With oil prices at their lowest levels in recent years, the New Zealand dollar weakening against the US dollar, economic problems in Europe and continued instability through the Middle East, it is difficult to predict how the year will unfold,'' he said in a statement yesterday.
Five new stores are planned for next year.
Briscoes Homeware and Rebel Sport will open new stores in Auckland and Queenstown and a new Rebel Sport store will also open in Hornby, Christchurch.
Craigs Investment Partners broker Peter McIntyre said it was a strong result, which would not be the case for many other retailers.
''The operation is now like a well-oiled machine, good headline numbers, some growth and firm grip on [stock] inventories,'' he said.
Cash in hand was up by almost $5 million, and while delivering an increased dividend, the company was continuing to reinvest in growth.
Forsyth Barr broker Suzanne Kinnaird said the earnings growth had been driven by a solid performance in Homeware, and another standout performance at Rebel Sport.
''The reported normalised profit of $38.3 million was marginally below our expectations of $38.6 million,'' she said.
However, Ms Kinnaird said the Homeware division featured profit margin improvement and a 3.5% gain in same-store sales growth, while Rebel Sport booked a strong lift in profit margin, exceeding Forsyth Barr's forecast, and same-store sales growth was up 7.9%.
She said while Briscoes had issued no specific guidance for full-year 2016, it was ''cautiously optimistic'' about the year ahead.
''There is risk from a weaker New Zealand dollar against the US dollar. However, Briscoes will likely mitigate this through pricing, strong buying and inventory management.''
Mr McIntyre said given little movement on the share price yesterday, it had gained 15.23% during the year, and had previously gained 22.9% on the year before.
''There is some caution out there about how much more growth there is, which could cap the share growth,'' he said.
The question now was how many stores the Briscoes group could open ''before reaching saturation point'', Mr McIntyre said.
Mr Duke said the group's earnings before interest and tax (ebit) was enhanced by a $1.34 million settlement of business interruption insurance claim, which arose from the February 2011 Christchurch earthquake.
Excluding that payout, group ebit and after-tax profit increased by respectively 14.51% and 14.19%.
The number of homeware stores across the group remained at 46 during the year, but total floor area increased to 95,787sq m from two store relocations.
Rebel Sport opened one new store and relocated another, boosting space to 53,993sq m.
Mr Duke said on a same-store basis, the homeware and sporting goods divisions returned sales increases of respectively 3.52% and 7.87% for the year ended January 25.
''During the year, $12.69 million of capital investment was made by the group,'' Mr Duke said.
Inventories totalled $73.51 million at year-end, being $4.20 million higher than the $69.31 million reported last year; reflecting extra stock for both the new Rebel store and increasing online sales, plus more product directly imported by the group, he said.
Cash and bank balances as at January 25 were $89.69 million, $4.93 million higher than last year's $84.76 million.
Full-year figures
Group trading, for the year to January 25
• Sales revenue up 4.9% to $507 million.
• Earnings before interest and tax, up 17.47% to $53.12 million.
• After-tax profit up 17.06%, to $39.30 million.
• Total dividend year, up 12% to 14c per share.
• Gross profit margin increased from 38.50% to 38.90%.
SOURCE: BRISCOES
