KEY POINTS:
Bellwether retailer Briscoe Group has reported a 70 per cent fall in half-year profit on the back of a collapse in consumer confidence, but expects a stronger second half.
Net profit after tax for the six months to July 27 was $3.09 million, down from $10.53 million reported
in the same half of last year. But the result remained slightly better than the company's June forecast of earnings between $2 million and $3 million, thanks to a July lift in sales.
And group managing director Rod Duke believed the second half would be stronger, thanks to moves to manage inventories and control costs.
"The uncertainty of the economic environment makes it difficult to predict a result for the second half of this year. We are only six weeks into the second half but I'm picking we will be a lot closer to last year's second half profit of $11.91 million than our past six month's result of $3.09 million."
Analysts appear to concur, with net profit after tax forecasts for the full year ranging between $7 million and $15 million. The New Zealand retail environment, however, was expected to remain weak, keeping pressure on margins high.
There was also concern over the impact of the weaker New Zealand dollar on the cost of buying stock.
Goldman Sachs JBWere analyst Rodney Deacon said there would certainly be an impact, as the company purchased its stock mainly in US dollars.
Deacon was cautious about the any lift from a much anticipated drop in the official cash rate in September.
"I guess we're just cognisant of the fact that there's still a lot of people on fixed rate mortgages. There's a lot of people that have lost their jobs throughout the country over the last six months and both of those things could have an impact on spending going forward."
Total sales revenue for the group - which trades through the Briscoes Homeware, Living & Giving, Urban Loft and Rebel Sport stores - was $181.95 million, down 4.4 per cent from the $190.26 million generated in the same period last year.
Homeware sales decreased 1.75 per cent to $126.14 million, while sporting goods sales fell 9.79 per cent to $55.81 million. On a same store basis, homeware sales fell by 4.59 per cent, while sporting goods collapsed 14.06 per cent.
Gross margin percentage also fell, from 41.02 per cent to 39.39 per cent. The company said additional promotional activity to drive sales impacted on gross profit margin, as did winter's late start and low consumer confidence.
Despite this, the company has opened nine new stores, with two others planned for later this year. Inventory levels at July 27 were $65.21 million, just up slightly on the $64.93 million at the same time last year.
A fully imputed interim dividend of 1 cent per share was declared. Briscoe's share price closed unchanged at 93c yesterday.