Michael Hill starts the reporting season today and Forsyth Barr broker Suzanne Kinnaird expected Canada to be the highlight of the jeweller’s results.
The United States and specialty stores Emma & Roe were the weak links.
Emma & Roe had underperformed throughout 2017 and there had been divergent trends in Queensland and New South Wales.
"We view Emma & Roe as an attractive long-term growth opportunity but believe the brand may take longer to build to targets than initial management expectations."
The settlement of the longstanding tax dispute with the Inland Revenue Department in late 2016 would have some one-off impacts on reported growth, she said.
Forsyth Barr would look for margins and divisional mix, an update on the chief financial officer hiring progress, updated strategic plans and outlook, particularly for loss-making divisions.
Restaurant Brands and Hallenstein Glasson were expected to be the top performers this season, Ms Kinnaird said.
Strong growth for Restaurant Brands would be underpinned by acquisitions and Hallenstein Glasson had implemented a strategic change in direction.
The only exception to the positive retail reporting season was expected to be The Warehouse Group, driven by margin pressure in Red Sheds.
The retail macro environment was still supportive to sales growth and industry growth in New Zealand was tracking between 3% and 5%. The sector remained highly competitive, which could affect those not having a competitive advantage, a compelling offering or where the product range did not resonate with the consumer, she said.
Briscoe Group was a consistent retailer continuing to deliver growth. However, the first-half financial year growth was set to be lower than the usual double-digit levels. The company provided guidance for first-half reported profit of at least $28million, up at least 2.7% on the prior year.
That followed a more challenging second quarter.
"We expect solid sales growth, albeit a small contraction in margins as the group traded some margin to maintain sales momentum."
Forsyth Barr would look for divisional detail, inventory levels and cash position, outlook commentary given a more capex-heavy year ahead, and some moderating economic drivers, Ms Kinnaird said.
Hallenstein Glasson was back in style. Glassons was expected to be the key driver of strong growth following recent strategic changes and improved buying after three years of earnings decline for the chain.
A watch would be kept on the outlook commentary, and how sustainable the turnaround was for Glassons and for how long, along with dividend and inventory levels.Any insights from new chief executive Mark Goddard on his views and priorities would be welcomed, she said.
Kathmandu had provided full-year guidance up 8% on the previous year. The strong result was underpinned by solid same-store sales growth — helped by a positive winter sale period — in both its core markets. The retailer continued to execute well following a change in management about two years ago, along with a suite of strategic changes, Ms Kinnaird said.
Forsyth Barr would look for a decline in inventory levels, reflecting a strategic focus ahead, and a corresponding material reduction in debt levels on the previous year.
Acquisitions would continue to boost reported growth for Restaurant Brands, she said.
A strong result was expected from KFC New Zealand and the first-half result would benefit from a full period of KFC Australia, recent bolt-on acquisitions in Australia and the first-time contribution from Hawaii of just less than six months.
Ms Kinnaird would focus on any more detail being released about expansion plans in Australia and potential timing, particularly on progress with the ongoing Yum! store divestment programme in Australia.
The Warehouse Group had provided guidance of adjusted reported profit of between $54millon to $58million, including the expected losses from Financial Services of about $10million.
"Given the recently announced conditional sale, we expect this division to be reported as discontinued."
With the removal of Financial Services losses, Forsyth Barr was forecasting earnings before interest or tax to be down 4.5%, largely underpinned by margin pressure in its core Red Sheds chain.
While a new strategy could require some upfront investment, the Warehouse would need to deliver results to provide confidence in its new strategy and the future earnings profile, Ms Kinnaird said.
She would look for more detail on strategic plans, particularly cost-cutting targets and financial milestones, for investors to monitor the success of the new strategy.
