EUR 850.00 For Business Accounts Only

Morningstar | Briscoe Group’s Sales Tracking With Our Forecast; FVE Unchanged at NZD 3.65

We maintain our NZD 3.65 fair value estimate following no-moat-rated Briscoe Group’s sales results for the quarter ended July 29, 2018, with shares currently screening as fairly priced. The group’s sales growth picked up in the second quarter, with sales growth of 5.0%, the strongest seen in five quarters. In the first half of fiscal 2019, group sales increased by 4.3%, tracking with our unchanged full-year estimate of 4.9%. Gross margins improved on first-half fiscal 2018, despite intense competition and macroeconomic headwinds, and management expected an increase in its half-year profit. We expect gross margins to improve by 30 basis points in full-year fiscal 2019, and net profit after tax, or NPAT, to increase by 3.6%.

The group’s sales growth was driven by the homeware segment, accounting for about two thirds of group sales. The homeware segment cycled flat sales and grew by 7.3%, but we expect its growth rate to moderate in the second half. For the full year, we expect homeware sales growth of 4.3%, slightly below the 4.5% achieved in the first half.

Opposed to the rebound in homeware, sales in the smaller sporting goods segment were virtually flat, with negative like-for-like sales growth of 0.3% in the quarter. The sporting goods segment cycled a strong second quarter, when the British and Irish Lions’ tour of New Zealand boosted sales by at least NZD 1 million in fiscal 2018. Adjusting for the impact, we estimate underlying sales at Rebel Sport rose by around 2.8%, versus the 0.6% headline growth rate reported. We expect sporting goods sales to grow by 6.0% in fiscal 2019, compared with the 3.8% reported, or an adjusted growth rate of 4.8%, in the first half.