Briscoe Group managing director Rod Duke said the gross profit margin for the year increased from 38.9% to 40.49%, reflecting the constant focus on inventory and promotion management.
While stock inventories were up $6.7million, from $73.51million a year ago to $80.20million, that was from three new stores opening, stock held for increasing online sales and more direct imports.
Mr Duke said benefits had accrued from initiatives such as stock-receipting (via scanning), continued refinement of local and international product ranges, prudent foreign exchange cover and increased sophistication of the construct, delivery and analysis of promotions.
On the company's outlook, Mr Duke said it was clear the New Zealand retailing environment ‘‘remains challenging'', and many retailers were struggling for growth, but we ‘‘remain cautiously optimistic'' about the year ahead for Briscoe.
‘‘It will be imperative for retailers to focus on protecting gross margin percentage as we start to experience the effects of a weaker New Zealand dollar against the US dollar,'' Mr Duke said.
Briscoe shares were up almost 3%, trading at $3.23 after the announcement.
Forsyth Barr broker Suzanne Kinnaird said the result was ‘‘strong'' and in line with expectations, albeit with the full dividend higher than expected.
She said the homeware division produced a ‘‘strong performance'' while Rebel Sport had ‘‘another standout result''.
However, she noted no full-year 2017 guidance was offered, and Mr Duke's comments on the New Zealand dollar weakness and its headwinds.
Mrs Kinnaird said Briscoe would probably try to mitigate this through strong buying, pricing and inventory management.
‘‘We are not forecasting [profit] margin expansion to continue given the more challenging operating environment.''
Craigs Investment Partners broker Peter McIntyre also described the result as ‘‘strong'' and pleasing for investors, given growth in gross profit, after tax profit and the dividend.
However, had the Kathmandu takeover been successful, it would have provided a growth strategy for Briscoe, but instead that was now $68.6 million of capital locked up.
‘‘The question has to be asked,'' Mr McIntyre said.
‘‘Is Briscoe at the top of its cycle, facing headwinds, especially with the currency weakening?''
Last year, Mr Duke made a hostile and unsuccessful bid to take over ailing Kathmandu, but his scrip and cash offer was unattractive to Kathmandu shareholders and acceptances were negligible.
He said yesterday that during the year $68.68million of capital investment went into purchasing the 19.9% Kathmandu shareholding, with the intention of merging the two companies.
‘‘As Kathmandu's largest single shareholder, we continue to watch its performance closely and remain open to the idea of progressing this at some stage in the future,'' Mr Duke said.
Largely because of buying the Kathmandu stake, cash at the end of January was down from $89.69million a year ago to $17.55million.
Other capital expenditure amounted to $13.18million, mainly for property settlements, fitting out three new stores, relocating two, refurbishing three and IT spending.
Mr Duke was pleased to report another record profit, the compound growth in after tax profit during the past five years was 16.9% per annum; ‘‘a performance we are very proud of given the challenging competitive environments encountered''.
Around Otago, in October the chain opened new Briscoes Homeware and Rebel Sport stores in Queenstown, and in Dunedin in May it plans to extend the existing retail and storage area, having secured a lease for an adjoining building.
It was inevitable importers' margins would be adversely affected over time, as earlier foreign exchange cover, taken at higher levels, matured.
He said online sales accounted for 4.5% of total sales for the year, and anticipated strong growth would continue for the foreseeable future.
Briscoe result
Full year to January 31
Total sales: up 9.04% to $552.89m.
Gross profit margin: 40.49% (Last year 38.90%).
Earnings before interest and tax: up 24.1% to $65.94m.
After tax profit: up 19.9% to $47.14m.
Total dividend: up 10.7% to 15.5c. Stores: 47 Briscoes, 35 Rebel Sport; online sales 4.5% of total
Source: Briscoe
