Morningstar | Briscoe Group's 4Q Sales Mark Strong End to Fiscal 2019; NZD 3.65 FVE Unchanged. See Updated Analyst Note from 11 Feb 2019
We reaffirm our NZD 3.65 fair value estimate for no-moat-rated Briscoe Group following accelerated sales growth in the fourth quarter. Revenue grew strongly, increasing 5.8%, up from 3.8% in the third quarter. The New Zealand retailer finished fiscal 2019 with full-year revenue of NZD 632 million, slightly ahead of our forecast of NZD 627 million and 4.4% higher than the prior year. Briscoe's guided to fiscal 2019 net profit after tax, or NPAT, of NZD 63 million, broadly in line with our prior NZD 62 million estimate. Our long-term thesis remains intact. We expect competition to remain intense, from both the brick-and-mortar and online channels, inhibiting further EBIT margin expansion. At current price levels, Briscoe is slightly undervalued, trading about 9% below our fair value estimate.The company delivered solid sales growth across both its homewares and sporting goods segments, buoyed by continuing strong online growth of about 27%. Full-year sales growth in homewares and sporting goods of 4.7% and 4.0%, respectively, was slightly above our forecasts of 4.3% and 3.5%. We forecast mid-single-digit group revenue growth over the five years to 2023, driven by same-store and online sales growth. We forecast NPAT to grow by a CAGR of 3.8% over the same period.
In the firm’s most important quarter, which includes Christmas trading, comparable homewares sales grew by 6.1%, and like-for-like sporting goods sales increased 3.4%. We are encouraged by Briscoe’s commitment to bolster its online offerings with a new online platform due to launch later this year, as we expect the online channel to continue growing in significance in New Zealand.
Briscoe Group is a non-trading holding company. Co. is engaged in the provision of management services to its subsidiaries. Through its principal trading subsidiaries, Co. is engaged in selling homeware products and retailing sporting goods. Co. operates two operating segments: Homeware and Sporting Goods. As of Jan 31 2010, Co. had 58 Homeware stores and 32 Sporting Goods stores located throughout New Zealand.
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