Retail margins across the entire sector in New Zealand are still under pressure after a challenging 2023 financial year.
This is according to Briscoe Group CFO Geoff Scowcroft, who spotlighted key challenges in business costs for its Briscoes Homeware and Rebel Sport subsidiaries.
“We don’t underestimate the challenge ahead for this year in relation to gross profit,” Scowcroft said. “As per our most recent sales release (for the first quarter [of 2024]), retail margins are under pressure across the whole sector - so the ‘balancing act’ continues.”
The group’s sales for the first quarter ending April 28 this year were $183 million, up just 1.03 per cent on the same time last year. Sales in its homewares segment dropped by 1.09 per cent, while sporting goods lifted by 4.28 per cent.
Scowcroft said the focus on costs is as critical as ever, with cost pressures continuing to be evident across every part of the Briscoe Group business.
“Store costs were especially under pressure during the year with increases in occupancy, stocktake and energy costs to name just a few,” Scowcroft said. “That’s before the third successive year of 6-7 per cent increases in store wages.
“It was therefore a significant achievement for the group to have decreased the overall cost of doing business in terms of both percentage of sales and actual dollar spend.”
Over the 2023 financial year, Briscoe Group’s store costs hit $123.89 million, up by just $1.3 million on the previous year. Administrative expenses were down by around $2 million to $89.1 million.
At the bottom line, Briscoe's overall net profit was $84.2 million, down by around $4 million on the previous year.
This also came amid capital investment of $15.1 million, including for the acquisition of existing Briscoes Homeware premises in Timaru, the refurbishment of seven stores and continuing investment in online, store and security initiatives.
The business has also tabled costings of $100 million over the next three years regarding its new North Island warehousing and distribution project - the funding of which should be mostly sustained from cash reserves with “minimal, if any,” borrowings arising from the normal seasonal pattern of business cash flow according to Scowcroft.
Amid all the cost increases across 2023, Scowcroft also highlighted external factors punching the business’ bottom line, including a one-in-200 year flooding event, a one-in-50 year cyclone, and a one-in-three year election, as well as ballooning interest rates which hit 5.5 per cent in May last year where it’s remained since.
“The counter to that is higher interest rates for those consumers and business which have cash deposits,” Scowcroft said, adding that Briscoe Group falls into this category and did benefit from increased interest income.
“While the economics of the retail sector is undoubtedly currently under considerable pressure, retail itself is far from down and out,” Scowcroft continued. “In fact, in my view, it’s quite the opposite.
“The emergence of the circular economy, the explosion of AI, the reach of social media and the power of customer and transactional data all screams opportunity for business and for retailers in particular.
“What we, as employees, as suppliers, as customers, and as shareholders can be certain of is how well place the group is in terms of resource, energy and strategy to continue to be a powerful force in New Zealand retail.”