The US Federal Reserve was forced to walk a fine line this week as it hiked rates amid banking turmoil, and New Zealand retailer Briscoe Group made a record profit, its managing director Rod Duke reveals his strategy to success. Video /NZ Herald
The owner of the Briscoes homeware chain and Rebel Sport has delivered record sales and protected its profit margin, amid an economic downturn hurting other retailers.
The Briscoe Group’s sales grew by 0.78 per cent to $792 million in the year to the end of January - counting the crucialChristmas, Boxing Day and Black Friday seasons.
Sporting goods were the leading segment, increasing by 1.17 per cent compared with a 0.54 per cent increase in homeware sales in the year.
However, profitability dipped slightly to $84.2m after tax, compared with the previous year’s record net profit of $88.4m.
“Like all retailers, we faced margin pressure from a number of factors as the impacts of the ongoing economic downturn were felt,” Briscoe managing director Rod Duke wrote in the company’s annual result.
The Briscoe Group has reported record sales of $792 million in the year to January 28, 2024. Photo / Warren Buckland
“However, the group has differentiated itself by protecting a significant portion of the margin percentage increase achieved during the Covid pandemic.
“I’m extremely proud to report that this result will represent the protection of 47 per cent of the 633 gross margin basis points gained during that period.”
The Briscoe Group’s profit included a $2.1m dividend payment from the retailer KMD Brands, owner of Kathmandu, that it partially owned.
The downturn was hitting KMD harder, with its sales down 14.5 per cent in the six months to the end of January.
Briscoe Group managing director Rod Duke says he's proud the business has protected most of its profit gains earned during the Covid-19 pandemic. Photo / Dean Purcell
“Looking forward, we remain cautious as to the retail environment with ongoing uncertainty in relation to economic conditions, customer sentiment and cost pressures,” Duke said.
“We do not underestimate just how challenging trading could be but are very confident in relation to the group’s ability to continue to perform and deliver superior results.”
Briscoe Group seemed to be the only retailer able to outperform in this economic environment.
Duke’s commentary suggested it was testament to the inventory management strategy, which was critical in enabling it to deliver sales growth and meet its profit goals.
Briscoe Group sold down $12.9m worth of stock in the year, leaving it with inventory worth $104.9m.
“As local and international supply chains have returned to more normal, reliable and cost-effective levels of service compared to the disruption of recent years, the team has been able to tighten the levels of inventory held by the group.
“We continue to invest considerable energy into refining, how, when and what we purchase, to continually improve our inventory measures.”
The business had no debt, with $175.4m in cash on hand.
Its bottom line benefited from $3.4m of an improved net interest position because of its improved cash balances amid higher interest rates.
It spent $15.1m in the year on technology, security measures such as upgrading alarm and camera systems, installing stronger roller shutters and concrete bollards, as well as refurbishing six stores.
“All store upgrades result in a dramatic difference to the look and feel of the stores and include the latest ideas from the new-store design concepts including LED lighting, redesigned fixtures, personalised counters, click and collect storage zones and dramatic new in-store signage,” Duke said.
Progress had also been made on its new distribution centre in Drury, South Auckland.
“We expect the project to require expenditure, inclusive of land and building construction, of at least $100 million across the next three financial years,” he added.
“This state-of-the-art facility will step-change our capability in warehousing and distribution, enhance inventory management across the entire group network including optimisation of the existing store footprint, to deliver significant performance and efficiency gains.”
Madison Reidy is the host of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.
