Briscoe Group’s first-half profit fell 6.3 per cent, but managing director Rod Duke said the result was “spectacular” given negative economic headwinds buffeting the retailer.

After-tax net profit came to $42.75 million in the six
months to July 30, down from $45.62m recorded in the previous corresponding period.

Duke told the Herald, “Sales were at record levels, the dividend to shareholders is at record levels and the profit, compared to the same time last year, is at about 94 per cent.”

“In the times we’re experiencing at the moment, I think that’s going to be best-in-class,” he said.

The retailer, which also owns Rebel Sport, said sales revenue hit a record high, up 0.35 per cent on last year at $369.24m.

The company declared an interim dividend of 12.50 cents per share, up 4 per cent on last year, with payments to be made on October 11 this year.

Duke had a cautious outlook on the full-year result, however, keeping the economic downturn and its impact on customers in mind.

“I don’t think the second half this year is going to be as good as the second half last year, but if I get 94 per cent off the back half, I’m going to be pretty happy with that too,” Duke said.

“Customers out there are generally feeling a bit tired, a bit worn out and a bit frustrated at the moment. They may be a little less inclined to spend as they were last year, but we’ve got Christmas coming up. “

He said while the revenue had a “modest increase”, maintaining strong homeware and sports goods sales “in this current environment is a significant achievement”.

The result showed the retailer is not immune to the current economic slowdown, as margins declined from 45.64 per cent last year to 43.73 per cent.

“Like all retailers, we are facing margin pressure from a number of factors as the impacts of the ongoing economic downturn are felt,” Duke said.

He emphasised the 51 per cent NPAT growth compared to half-year figures reported before the pandemic. NPAT posted in July 2019 came in at just $28.27m.

Group chairwoman Roseanne Meo said, “This half-year result represents a very solid performance considering the continued headwinds faced by the retail sector, and to post record sales for the half is a significant achievement.”

Homeware made up the biggest part of sales, but was up just 0.28 per cent on last year at $229.4m. Sporting goods sales came in at $139.85, up 0.46 per cent.

Duke said online sales made up 18.3 per cent of group sales, with investments in QR codes, improved information systems and shipping platforms.

Cashflow was up 30 per cent on last year, coming in at $126.9m. Duke said about $18m of creditor payments were paid out in July.

Labour market still tight, shipping costs fall

When asked about the labour market, Duke said costs are high compared to the last couple of years, but the company did raise wages for in-store staff by 7 per cent in the last half-year.

“We are very mindful of the impact on all our team from the declining economic factors in an employment market which continues to be very competitive,” he said.

Duke told the Herald “it is significantly more expensive in terms of the labour” – however, shipping costs are falling.

“The cost of shipping containers have come down around 50 to 60 per cent,” he said.

Duke said a major pain point for local retailers is the weakening Kiwi dollar.

“The other thing importers have got to be well aware of is that the Kiwi dollar has depreciated somewhat in the last year against the US dollar. You’ll see that in the cost of goods and in the gross margin,” Duke said,

Inventory levels were also up 6.2 per cent at $120.2m, which Duke attributes to a new Rebel Sport store and added purchases for “major sporting events during 2023″.

However, he said the majority of inventory cost increases reflect ongoing supply chain cost increases.

“The actual increase in units held was less than 1 per cent. We continue to work closely with our supply partners in relation to optimising the group’s inventory position,” Duke said.

New Rebel Sport store

Duke said the group was “delighted” to open a new Ashburton Rebel Sport store in April alongside the relocation of Ashburton’s Briscoes store.

“Both stores have been received extremely well within the local catchment and we are very pleased with how they are trading,” Duke said.

The company also completed three full-store refurbishments in the last six months at Briscoes Whangārei, Rebel Sport Taupō and Rebel Sport Manukau.

Duke said the company is planning “at least another three store refurbishments” for the second half of the year.

The retailer has not been immune to ongoing supply chain and labour costs plaguing retail.

Briscoe Group’s investment in clothing retailer KMD Brands returned a dividend of $1.44m in the last half-year, while higher interest rates gave the company a $2m increase in interest income.

Outlook: Proceeding with caution

Duke said the retailer’s goal for the full year “remains to be able to show that the group can protect around half of the 633-basis gross profit margin points gained during the two years ended January 2021 and January 2022″.

He said with plans in place, “we do not expect the same amount of decline for the second half of this financial year as was experienced for the first half”.

Duke said the company’s direct shipping initiative alone is expected to boost sales to over $10m this year. “We’re excited about the future opportunity from the momentum it’s generating.”

He said the company has secured the brands Dyson, Samsung and Ecoya, planned to launch at Briscoes stores by the end of the year, alongside the continued rollout of Huffer sportswear introduced to Rebel Sport stores this year.

However, Duke said the company remains “cautious” about the retail environment, “with ongoing uncertainty in relation to economic conditions, customer sentiment, cost pressures, higher interest rates and political uncertainty given the upcoming election”.

“As previously reported, we expect it to be difficult for the Group to replicate last year’s full-year record NPAT result of $88.4m.”

Duke said, however, the half-year results are a source of confidence: “This first-half performance against the widely reported retail slowdown gives me great confidence about our ability to produce a solid second-half result.”

Alka Prasad is an Auckland-based business reporter covering small business and retail.