Briscoe Group's boss says the retail company's record result is because Kiwis are sick of "cheap rubbish".
Group managing director Rod Duke said Kiwis customers are no longer looking for the cheapest price, they're looking for good-quality brands that work.
"Over the past seven or eight years, a new perception of value has developed," Duke said. "Kiwis are over cheap rubbish, they're over lowest price guarantees. They're sick of buying things that break. We like to deliver good-quality brands they know, cheaply."
Duke said part of the Briscoe strategy is knowing its customers and knowing what motivates them and surveys show that retail brands like Rebel Sport and Briscoe have a strong top-of-mind awareness.
"Ask someone on the street where to go to buy sporting goods; they'll say Rebel Sport," he said.
Rebel Sport, Duke said, is a "machine".
"If we had a better summer, the results would have been even better," he said.
Duke brushed off concerns about e-commerce giants Alibaba and Amazon heading to our shores.
"Some product categories will suffer," he said, "but they tend to be books and women's fashion." Briscoe Group's products would be less affected, Duke said, and the company had plans to push and expand its own e-commerce, which already accounted for 7 per cent of total sales.
Briscoe Group lifted annual profit 26 per cent in the results posted today.
Net profit rose to $59.4 million, or 26.5c a share, in the 52 weeks ended January 29 from $47.1m, or 21.2c, a year earlier when its balance date included an extra week, the Auckland-based retailer said. It widened gross margins to 41.07 per cent from 40.49 per cent in 2015 and 38.9 per cent the year before.
Rival Warehouse Group, now eclipsed by Briscoe's market capitalisation, last week reported a 76 per cent slump in first-half profit as it booked an impairment charge against its financial services unit, faced restructuring costs, and saw gross margins shrink 70 basis points to 32.2 per cent across its group.
Briscoe shares, of which Duke owns more than three-quarters, last traded at $4.39 and have gained 8.9 per cent so far this year. That values Briscoe at $963.7m, compared with $863.6m for Warehouse, which was recently up 0.4 per cent to $2.49.
Briscoe's bottom line was also bolstered by $4.4m in dividends from its 19.9 per cent stake in outdoor equipment chain Kathmandu. Duke said he was watching "Kathmandu's performance closely as they seek to restore historical levels of profitability".
Kathmandu's board rebuffed a Briscoe takeover offer in 2015, offering five of its own shares for every nine Kathmandu shares plus 20c cash, which at the time was an implied offer of $1.80 a share. Kathmandu's shares were recently up 1.6 per cent to $1.94, and Briscoe valued the stake at $76.6m at the January 29 balance date, up from $60.9m a year earlier.
Briscoe increased online sales by more than 40 per cent, and they accounted for 6 per cent of the retailer's $582.8m in revenue.
The company is rolling out a simplified programme to interact with customers to more stores after it was successful at a small number of outlets, and its Rebel Sport merchandising team is working closely with suppliers to battle increased competition.
- With BusinessDesk