Briscoe beats annual profit forecast, remains 'cautiously optimistic'

Briscoe's inventories increased to $80.2 million at the end of the year, from $73.5 million a year earlier. Photo / Ross Setford

Briscoe Group, which operates stores selling household items and sports goods, beat its full-year profit forecast, and said it was "cautiously optimistic" about the year ahead in a "challenging" retail environment.

Profit increased to $47.1 million in the 53 weeks ended January 31, from $39.3 million in the 52-week period ended January 25, 2015, the Auckland-based company said in a statement. That's ahead of the retailer's forecast last month for a profit of at least $46.5 million. Sales rose 9 per cent to $552.9 million. On a same-store basis, and adjusting for an additional week in the latest year, sales increased 5.4 per cent.

Briscoe's profit reached a new record, with its gross profit margin increasing to 40.5 per cent from 38.9 per cent the year earlier, as the retailer focused on inventory management, new technology to manage stock, refined the quality and breadth of its international and local product ranges, fine tuned its promotions and gained from prudent foreign exchange cover.

"Central to our success has been our drive to continually improve all aspects of our business," said managing director Rod Duke. "We look forward to another year of improving and growing our business. It is clear that the New Zealand retailing environment remains challenging with a number of retailers struggling for growth, but we remain cautiously optimistic about the year ahead for Briscoe Group."

Duke said retailers this year will need to focus on protecting their gross margins as the imported cost of overseas goods increases as the New Zealand dollar weakens against the US dollar.

The company will pay a final dividend of 9.5 cents per share on March 31. That takes the total dividend for the year to 15.5 cents per share, ahead of the year-earlier 14 cents.

Briscoe shares rose 0.6 per cent to $3.16 and have gained 9.4 per cent this year.

Central to our success has been our drive to continually improve all aspects of our business.

In the homeware division, earnings before interest and tax jumped 22 percent to $40.4 million, as sales advanced 6.2 per cent $357.9 million. The company added one homeware store in Queenstown during the year, taking the total to 47, extended its Invercargill store and relocated to larger premises in Taupo and Hamilton. The total store area increased to 100,085 square metres from 95,787 square metres.

For the sporting goods unit, ebit rose 36 percent to $25 million as sales advanced 15 percent to $195 million. The unit's total floor area increased to 56,394 square metres from 53,993 square metres after it added new stores in Hornby and Queenstown.

Online sales accounted for 4.5 per cent of group sales during the year and the company said it anticipated strong growth to continue for the forseeable future.

The company's inventories increased to $80.2 million at the end of the year, from $73.5 million a year earlier, reflecting the three additional stores and the increased stock held to satisfy the significant increases in online sales and higher amount of product the company imported directly.

The retailer plans to open new Briscoes Homeware and Rebel Sport stores at the Westgate shopping development northwest of Auckland, and expand its homestores in Dunedin and in Taranaki Street in Wellington.

Its cash and bank balances at the year end stood at $17.6 million, from $89.7 million a year earlier, reflecting its $68.7 million purchase of a 19.9 per cent shareholding in outdoor equipment and clothing retailer Kathmandu Holdings. Briscoe failed in its takeover bid for the company, although Duke said today he "remains open to the idea of progressing this at some stage in the future."

Read the full-year results here: