New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Briscoe Group<br>3Q21 Sales Checkout</h2>
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<h3>RESEARCH&nbsp;INSIGHTS</h3>
<p>Briscoe&nbsp;Group (BGP) has delivered another quarter of stellar growth with 3Q21 group sales up +15% on the prior year period accompanied by a robust gross margin. Following the strong recovery in sales, BGP has repaid its wage subsidy of NZ$11.5m. BGP appears well positioned heading into Christmas, with&nbsp; closed borders and&nbsp;buoyant house prices supportive of continued consumer spend, particularly for&nbsp;Homeware. However, a high level of uncertainty remains into FY22 as the underlying economic backdrop becomes clearer. Given its consistent track record of performance and robust balance sheet position, we view BGP as relatively well placed to weather any near-term turbulence.</p>
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<h3>Another strong quarter&nbsp;—&nbsp;positive momentum continues</h3>
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<p>3Q21 sales surged +15% on the prior comparable period, with underlying sales momentum fairly consistent from month to month (aside from Auckland's stint back into Alert Level 3). Rebel Sport was the stand out in the quarter, with sales up +19% on the prior year period, while Homeware sales increased +12%. Online sales remained healthy, representing 16% of group sales having moderated from 23% in 2Q21 (FY20 11%). Commentary suggests margins remain healthy, as strong sales enabled lower promotional activity and supply chain efficiencies provided additional uplift.</p>
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<h3>Optimistic into Christmas for a strong year end...</h3>
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<p>BGP is relatively well positioned heading into the key Christmas trading period, helped by a buoyant housing market and a reallocation of travel spend supportive of current retail momentum. BGP is also benefitting from category exposure, with two key purchasing trends post-lockdown being nesting and athleisure. Supply chain congestion across the sector raises some inventory shortage concerns, although BGP's track record and range of well recognised brands mitigates this risk, in our view.&nbsp;</p>
<p>Year to date group sales are up +2.4% on the prior year period (Rebel Sport +4.1%​​​​​​, Homeware +1.3%). We lift our full year run rate to +4.5% (from +2.4%), which implies 4Q21 group sales growth moderates (but remains strong) to +9.2%.&nbsp;</p>
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<h3>...maintain some caution beyond</h3>
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<p>BGP has delivered stellar sales growth in the last two quarters, more than offsetting the lost sales during lockdown. We have steadily lifted our FY21E earnings growth assumption over the past six months, which has swung down from as much as -52% in May to up +5.1% today, highlighting the materiality of recent sales results. However, as broad government stimulus tapers off and the economic realities of COVID-19 become clearer, we expect this will be hard to replicate. We maintain our cautious view on the medium-term outlook, forecasting a decline in FY22E group NPAT to below pre COVID-19 levels.</p>
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<div><strong>Guy Hooper</strong></div>
<div><a href="mailto:guy.hooper@forsythbarr.co.nz" target="_blank" rel="noopener">guy.hooper@forsythbarr.co.nz</a></div>
<div>+64 4 495 5255</div>
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Briscoe Group 3Q21 Sales Checkout

RESEARCH&nbsp;INSIGHTS
Briscoe&nbsp;Group (BGP) has delivered another quarter of stellar growth with 3Q21 group sales up +15% on the prior year period accompanied by a robust gross margin. Following the strong recovery in sales, BGP has repaid its wage subsidy of NZ$11.5m. BGP appears well positioned heading into Christmas, with&nbsp; closed borders and&nbsp;buoyant house prices supportive of continued consumer spend, particularly for&nbsp;Homeware. However, a high level of uncertainty remains into FY22 as the underlying economic backdrop becomes clearer. Given its consistent track record of performance and robust balance sheet position, we view BGP as relatively well placed to weather any near-term turbulence.


Another strong quarter&nbsp;—&nbsp;positive momentum continues


3Q21 sales surged +15% on the prior comparable period, with underlying sales momentum fairly consistent from month to month (aside from Auckland's stint back into Alert Level 3). Rebel Sport was the stand out in the quarter, with sales up +19% on the prior year period, while Homeware sales increased +12%. Online sales remained healthy, representing 16% of group sales having moderated from 23% in 2Q21 (FY20 11%). Commentary suggests margins remain healthy, as strong sales enabled lower promotional activity and supply chain efficiencies provided additional uplift.


Optimistic into Christmas for a strong year end...


BGP is relatively well positioned heading into the key Christmas trading period, helped by a buoyant housing market and a reallocation of travel spend supportive of current retail momentum. BGP is also benefitting from category exposure, with two key purchasing trends post-lockdown being nesting and athleisure. Supply chain congestion across the sector raises some inventory shortage concerns, although BGP's track record and range of well recognised brands mitigates this risk, in our view.&nbsp;
Year to date group sales are up +2.4% on the prior year period (Rebel Sport +4.1%​​​​​​, Homeware +1.3%). We lift our full year run rate to +4.5% (from +2.4%), which implies 4Q21 group sales growth moderates (but remains strong) to +9.2%.&nbsp;


...maintain some caution beyond


BGP has delivered stellar sales growth in the last two quarters, more than offsetting the lost sales during lockdown. We have steadily lifted our FY21E earnings growth assumption over the past six months, which has swung down from as much as -52% in May to up +5.1% today, highlighting the materiality of recent sales results. However, as broad government stimulus tapers off and the economic realities of COVID-19 become clearer, we expect this will be hard to replicate. We maintain our cautious view on the medium-term outlook, forecasting a decline in FY22E group NPAT to below pre COVID-19 levels.




Guy Hooper
guy.hooper@forsythbarr.co.nz
+64 4 495 5255




Briscoe

Briscoe Group: 3Q21 Sales Checkout