Briscoe expects to beat record profit as sales bounce after lockdown

Tuesday, 14 September 2021

Briscoe expects sales to bounce back after lockdown.

Briscoe Group’s first-half profit jumped 70 per cent and the retailer expects its full-year profit to beat last year’s record as it benefits from pent-up consumer demand following lockdown.

The company, which includes Briscoes Homeware, Rebel Sport, and Living & Giving, reported profit of $47.5 million for the 26 weeks to August 1, up from $28m last year. That’s in line with its forecast for profit of at least $46m.

Briscoe’s second half will be impacted by the national level 4 lockdown in place from August 18. The company lost $17m of sales in the final two weeks of August, but it expects to recover.

“The financial impact of nationwide store closures, as we know from the previous national lockdown, is immediate and severe,” the company said in a statement to the NZX. “However, we also know from the same experience that pent-up demand during lockdown drove strong consumer demand post-lockdown.”

* Briscoe expects record annual profit after demand surged following lockdown

* Briscoe third-quarter sales rise 15%; retailer upbeat heading into Christmas

Businesses say a 'flip flop' change in rules for what they can sell at level 4 is leaving them hurting. Many are still offering online orders, contactless drop offs or serving with social distancing rules in place.

Whilst the continued lockdown in Auckland has an ongoing impact on sales, Briscoe said it was encouraged by the rest of the country moving down alert levels.

Level 3 enabled the retailer to extend its product range from essential items to its full range via online trading, and also to offer a click-and-collect service, while level 2 enabled stores to re-open with prescribed protocols.

Briscoe expects Auckland to be at level 4 or 3 for the remainder of September, with the rest of the country at level 2 or 1.

“Under these assumptions we estimate September sales could be negatively impacted by around the same level as August,” the company said.

While uncertainty around economic conditions had greatly increased since August 18, and the degree to which consumer demand would rebound as different parts of the country moved down alert levels was not certain, Briscoe said from last year’s experience it expected pent-up demand to drive strong group sales from October through to the end of its financial year on January 30, 2022.

If that is the case and New Zealand continues to progress without any further lockdowns or outbreaks, Briscoe expects to beat last year’s record full-year profit of $73.2m, noting profit this year could be as high as $85m.

In the first half, Briscoe Group’s sales increased 23 per cent to $358.4m and the company noted it is benefiting from improvements to its supply chain.

Briscoe is holding more inventory than normal so it is prepared in the event of any potential international supply chain disruptions due to Covid-19 such as factory delays, lack of shipping availability, port disruptions and increased costs.

At August 1, the company held $101m worth of inventory, up from $86.7m at the same time last year.

“Although inventories have closed higher than in recent years, we’re in great shape for the second half to avoid being hindered by shortages we have already seen occurring across the wider retail market,” said managing director Rod Duke. “Having sufficient inventory in the current retail environment is a distinct competitive advantage.”

Briscoe will pay an 11.5 cent interim dividend, up from 9 cents last year.

In May, the company increased the wage rates for its in-store hourly-paid staff by 6.4 per cent, noting the employment market “remains extremely competitive and we expect it to remain so for some time.”

Shares in Briscoe were unchanged at $7 in midday trading, and have gained 78 per cent over the past year.