Covid 19 Delta outbreak: Briscoe Group half-year profit soars, expects more ‘pent-up’ demand

Briscoe Group is maintaining a cautious outlook amid Covid-19 restrictions but remains confident of bettering last year’s record full-year net profit of $85 million if “pent-up” demand follows last year’s post-lockdown trend.

The retailer today reported its first half result, with net profit for the six months to August 1 soaring 69.6 per cent to $47.46m. Total revenue climbed 22.6 per cent to $358.42m.

Briscoe – which operates homeware and sporting good stores – noted the financial impact of nationwide store closures since lockdown was announced on August 18 was immediate and severe.

“However, we also know from the same experience that pent-up demand during lockdown drove strong consumer demand post-lockdown,” the company said in its results commentary.

The NZX listed company said sales in the final two weeks of August were down by around $17m.

“Our modelling assumes 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.

“Clearly, the level of uncertainty around economic conditions has greatly increased sinceAugust 18, and the degree to which consumer demand will rebound as different parts of the country move down alert levels is also not certain; however, from last year’s experience we do expect pent-up demand to drive strong group sales levels from October through to the end of the group’s financial year on 30 January 2022.

“If that is the case and New Zealand continues to progress without any further lockdowns or outbreaks, we currently expect to be able to produce a net profit above last year’s record of $73.2m and up to $85m.”

Briscoe’s board declared an interim dividend of 11.5c a share, up on the 9c at the same time last year.

Managing director Rod Duke said the online business continues to perform exceedingly well, representing 16.16 per cent of group sales for the half-year, which was made efficient by system developments including new search feature, “Find-In-Store”.

This year, the group also received a dividend of $0.96m from its investment in NZX-listed outdoor goods retailer Kathmandu, which did not pay dividends last year because of the impact of Covid-19.

The group closed the period with a cash balance of $93.93m, compared to $98.56m held at the same time last year.

Duke said the group’s homeware sales increased by 20.77 per cent from $184.35m to $222.63m and sporting goods sales by 25.66 per cent from $108.06m to $135.79m.

He said the group had also had benefits emerging from the work it was doing with KPMG to improve inventory in relation to store operations.

“The team right across the board continues to do a fantastic job for us day-in, day-out and we were pleased to be able to increase the wage rates for our in-store hourly-paid team by 6.4 per cent from May 2021. The employment market remains extremely competitive and we expect it to remain so for some time.”

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