The Briscoe Group's ability to improvise is likely to stand it in good stead, irrespective of market conditions and competition, Morningstar senior consumer analyst Tim Montague-Jones says.
Releasing the latest analysis of one of New Zealand's premier retailing groups, Mr Montague-Jones said Briscoe held an enviable brand presence in New Zealand as a result of an aggressive promotional approach, a broad geographical presence and an ''everything under one roof'' approach to its stores.
''We believe the company could continue to achieve high single-digit growth in the medium term.''
An improving consumer backdrop, innovative product ranges and cost management would be the main drives of bottom-line earnings in the future.
Rebel Sport and Briscoe were ''extremely recognisable'' brands with great customer appeal, he said.
Those stores would be the preferred option for a majority of consumers in their respective fields.
Heavy reliance on promotional activity had led to Briscoe's market-leading position. One example of that was the use of ''Tammy'', the face of Briscoe.
''This iconic advertising campaign involving Tammy resonates well with consumers.''
Briscoe also had a broad domestic presence throughout New Zealand and its stores were found in nearly all major centres, Mr Montague-Jones said.
Scale-related efficiencies were assumed given its broad presence, especially in relation to inventory and logistical costs.
Although Briscoe had great brand awareness and benefited from a large scale, Morningstar did not allocate a competitive rating to the company, given the competitive threats facing it, he said.
''Sport and homeware retailing is also a highly competitive market and price competition is a major factor in determining sales. Unfortunately, price competition also contributes to margin pressure.''
With no debt on the balance sheet, Briscoe was at no risk of defaulting on its interest payments, Mr Montague-Jones said.
The company was expected to be debt-free for the foreseeable future, Considering the firm's lazy balance sheet, the board might consider capital management options such as paying bonus dividends and/or buying back stock to improve shareholder value.
The last bonus dividend was paid in 2012 and it was envisaged another such dividend could be paid in the next six months to 12 months.
''The company has shown its ability to produce strong operating cash flow, and we expect that to continue.''
The bulls say:
- Briscoe benefits from extremely well-known brands
- Scale-related efficiencies are reaped as a result of the company's broad geographic presence in New Zealand.
- Briscoe has taken steps to cut costs, improve inventory management and better align employees' pay with the company's performance.
The bears say:
- Aggressive promotional activity leads to margin pressure as customers defer their purchases until sale time.
- The company operates in a highly competitive industry.
- Briscoe's more specialist brands - Giving & Living and Urban Loft - have struggled during the past few years and have not lived up to expectations.
