Morningstar | Briscoe Protects GP Margins but Sporting Goods Sales Weaker Than Expected; FVE Unchanged at NZD 3.65
We maintain our NZD 3.65 fair value estimate on no-moat rated Briscoe Group despite lower-than-expected Sporting Goods sales in the third quarter of fiscal 2019. We anticipated a stronger rebound in the third quarter after a challenging second quarter cycled the British & Irish Lions rugby tour in the previous corresponding period. We cut our full-year sales growth estimate to 3.5% from 6.0% but maintain our long-term estimates with average growth in sporting goods of 4% over the next five years. Like-for-like sporting goods sales grew by only 0.6% versus a decline of 0.3% in the prior quarter.At the group’s larger Homeware segment, however, sales growth is tracking our full-year estimate. Headline sales growth of 4.2% in the first nine months of fiscal 2019 versus our unchanged full-year estimate of 4.3%. Our long-term sales average sale growth estimate for Homeware is unchanged at 4%.
We now forecast total group sales to increase by 4.0% in fiscal 2019, down from 4.9% previously. This is slightly ahead of the 3.8% growth in group sales year to date.
We expect gross profit margins to expand by 25 basis points to 40.8% in fiscal 2019 and average 41% over the next decade, despite fierce competition. Gross profit margins were well managed during the quarter, expanding during the quarter compared with the previous corresponding period. In the first half of fiscal 2019, gross profit margins expanded by 35 basis points.
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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