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Forsyth Barr

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Briscoe Group (BGP)</h2>
4Q20 sales
Briscoe Group (BGP) reported quarterly sales slightly behind our expectations although earnings commentary suggests margins may have been slightly ahead relative to our forecasts. We do not expect any change to market expectations.
4Q20 sales were up +1.8% to NZ$210m driven by a good performance in its Sporting goods chain combined with additional store openings. Sales for FY20 were up +3.3% to NZ$653m, slightly behind our expectations. FY20 same store sales (SSS) growth for the group remains robust amid a tough retail environment, up +2.0%, albeit weighed down by a 4Q decline in the Homeware division.
Consistent with wider retail sector commentary, BGP saw some pull through of December sales into the November Black Friday period. The event driven sales period placed additional pressure on gross margins. Gross margin contraction continues, although FY20 gross profit dollars are expected to be ahead of the prior year period, consistent with expectations.
Guidance commentary
The company says that it was satisfied with its trading performance amid continued cost pressures but notes a challenging operating environment with subdued consumer and business confidence. BGP has guided to FY20 NPAT of at least NZ$64.0m on a like for like basis (pre-IFRS 16), in line with our FY20E of NZ$64.9m. Impacting the reporting in the current period will be the adoption of IFRS 16 treatment of leases, which is expected to have a -NZ$2.7m impact on reported FY20 NPAT.
Divisional detail
<ul>
<li>Homeware: Homeware disappointed relative to our expectations with quarterly SSS falling -2.0%. One new store was opened during 2H20, lifting total store sales decline to -0.7%. On a full year basis Homeware sales increased +1.9%, behind our expectations. Of note, this is the first quarter of quarterly sales decline in the Homeware division since 1Q12.</li>
<li>Sporting goods: Sporting goods achieved quarterly SSS growth of +2.7%, with total sales growth of +6.5% bolstered by two new store openings during 2H20. On a full year basis Rebel Sport grew sales +5.8%, slightly ahead of our expectations.</li>
<li>Online: E-commerce FY20 sales increased +16% year on year and represented 11% of total group sales.</li>
</ul>
Figure 1. Quarterly sales breakdown
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.2&amp;permmsgid=msg-f:1657467252784498955&amp;th=170081af4d10090b&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ--s6046_j_-Rq7IQqzG8uOo3Riueu62w1RE26GC3TkNyp6P3OF-Yp-PqsEJ30c1dI9--ylnUs4yRPl48F3A-K_KIUKVtR3XL8m7Mp0msmthAj2MtrJ6QdH1D0&amp;disp=emb" width="1347" height="365" class="editor-image img-responsive" data-image-whitelisted=""></figure>
Source: Forsyth Barr analysis, company reports
Guy Hooper Analyst, Equities Forsyth Barr Limited
P:+64 4 495 5255 |TF:0800 367 227 Level 22 , 157 Lambton Quay, Wellington

Briscoe Group (BGP)
4Q20 sales
Briscoe Group (BGP) reported quarterly sales slightly behind our expectations although earnings commentary suggests margins may have been slightly ahead relative to our forecasts. We do not expect any change to market expectations.
4Q20 sales were up +1.8% to NZ$210m driven by a good performance in its Sporting goods chain combined with additional store openings. Sales for FY20 were up +3.3% to NZ$653m, slightly behind our expectations. FY20 same store sales (SSS) growth for the group remains robust amid a tough retail environment, up +2.0%, albeit weighed down by a 4Q decline in the Homeware division.
Consistent with wider retail sector commentary, BGP saw some pull through of December sales into the November Black Friday period. The event driven sales period placed additional pressure on gross margins. Gross margin contraction continues, although FY20 gross profit dollars are expected to be ahead of the prior year period, consistent with expectations.
Guidance commentary
The company says that it was satisfied with its trading performance amid continued cost pressures but notes a challenging operating environment with subdued consumer and business confidence. BGP has guided to FY20 NPAT of at least NZ$64.0m on a like for like basis (pre-IFRS 16), in line with our FY20E of NZ$64.9m. Impacting the reporting in the current period will be the adoption of IFRS 16 treatment of leases, which is expected to have a -NZ$2.7m impact on reported FY20 NPAT.
Divisional detail

Homeware: Homeware disappointed relative to our expectations with quarterly SSS falling -2.0%. One new store was opened during 2H20, lifting total store sales decline to -0.7%. On a full year basis Homeware sales increased +1.9%, behind our expectations. Of note, this is the first quarter of quarterly sales decline in the Homeware division since 1Q12.
Sporting goods: Sporting goods achieved quarterly SSS growth of +2.7%, with total sales growth of +6.5% bolstered by two new store openings during 2H20. On a full year basis Rebel Sport grew sales +5.8%, slightly ahead of our expectations.
Online: E-commerce FY20 sales increased +16% year on year and represented 11% of total group sales.

Figure 1. Quarterly sales breakdown

Source: Forsyth Barr analysis, company reports
Guy Hooper Analyst, Equities Forsyth Barr Limited
P:+64 4 495 5255 |TF:0800 367 227 Level 22 , 157 Lambton Quay, Wellington

Briscoe

Briscoe Group (BGP): 4Q20 Sales