Briscoe Group posted a decline in sales for the first time in years, with analysts warning it's a sign of how tough converting potential customers into sales currently is. Photo / NZME
Briscoe Group posted a decline in sales for the first time in years, with analysts warning it's a sign of how tough converting potential customers into sales currently is. Photo / NZME
Analysts believe Briscoe Group’s first financial update of 2025 is a warning sign for the rest of the industry, as the big-box retailer announced it would be downgrading its full-year profit forecast.
In a trading update to the market, managing director Rod Duke said it now believed the group’s full-yearnet profit after tax would “not meet the previous range by the group but would be greater than $66 million”.
Briscoe had previously told the market in a November update its net profit would fall in the range of $70m to $77m.
“In line with recent reports highlighting a struggling economy and sluggish spending across retail, we are yet to see any marked improvement in consumer confidence hoped for on the back of decreases in the OCR [Official Cash Rate],” Duke said.
Devon Funds head of retail Greg Smith said the forecast downgrade was a point for reflection in the industry.
“Consumers aren’t quite feeling the love, they’re still facing a lot of challenges. Many are still on high mortgage rates that have yet to come off and face cost-of-living pressures, including elevated borrowing costs. Briscoe’s has been pretty resilient in a tough environment,” Smith said.
“Being on target to achieve 99% of the previous year’s record sales is no mean feat, but is just an important signal around the economy and how tough it is for a lot of retailers that rely on that December period.”
Smith said while there is some positivity for Briscoe, the profit downgrade undercores the scale of New Zealand’s current recession.
“It doesn’t make great reading for the likes of The Warehouse Group, and you remember that a big proportion of their earnings comes from Noel Leeming, where there is not a lot of consumer appetite for big-ticket items.”
Sporting goods retailers will also likely be feeling the crunch, with big names including KMD Brands, parent of Kathmandu and Rip Curl, set to release its results in the coming weeks.
First Retail managing director Chris Wilkinson said the result is a reflection of the wider economy. Photo / Mark Mitchell
First Retail managing director Chris Wilkinson said consumer uncertainty and spending behaviours were becoming entrenched, stemming store visitor numbers and spending.
Wilkinson believed the group’s strategic decision to launch Black Friday sales earlier than usual wasn’t to their detriment.
“Most big retailers went in early and now the question for [2025] is going to be just how early is early going to be, because it was the weekend before Black Friday that we saw those big retailers, many of which were in Briscoe’s space, going in with pretty hard offers,” Wilkinson said.
He expects other retailers to follow Briscoe’s strategy in the year ahead and focus on cutting costs.
“One of the things we’re seeing that’s coming through really strongly in the UK at the moment is the focus on wage costs because wage costs, as they have here, have grown exponentially.
“There are lots of opportunities that remain open to retailers here to continue to drive down costs, whether that be more self-service, whether that be encouraging more people to be shopping online. If 2024 was the year of consolidation, 2025 is going to be the year of a strategic reset.”
According to Briscoe Group’s result for the nine weeks ended December 29, unaudited homeware sales rose by 0.82%, while sporting goods fell 0.2% year on year.
The group’s overall sales during the holiday period rose 0.42% year on year.
Duke said while there were some positive signs across Black Friday promotions, December trading was still below what had been expected.
“While Christmas trading, particularly our Boxing Day promotions, improved compared to Black Friday, December trading was still under anticipated levels.”
The wider 2024 result looks to have taken a hit in its final quarter, with the group’s sales falling by 0.28% in the 48 weeks to December 29.
Homeware sales fell 0.29% year on year, while sporting goods fell by 0.26% by the same measure.
Duke said finishing at 99% of last year’s record full-year sales would be “a significant achievement” and he hoped that by the end of the financial year on January 26, this would be the case.
“The current highly competitive retail environment continues to place pressure on both gross margins and bottom-line profit. We continue to focus on controlling costs and ensuring the closing inventory position optimises both cost and quality,” Duke added.
“A benefit of trading as hard as we are throughout this fourth quarter, will be a January year-end inventory position that will close under last year and ensure the group is extremely well placed for our new financial year.”
Boxing Day sales nationwide were up compared to 2023, however, spending leading up to Christmas was down compared to last year.
According to payments firm Worldline NZ, consumer spending processed through all non-food core retail merchants (excluding hospitality) on Boxing Day reached $67.7m, up by 13.1% on Boxing Day 2023.
Spending was highest in bookshops, clothing stores, hardware stores and sports equipment shops.
The average annual sales growth nationwide was up by 11.3%.
Tom Raynel is a multimedia business journalist for the Herald covering small business and retail.
