Archive | Briscoes

Published: 25 March 2005

Rebel Sport owner Briscoe Group Ltd has signed a conditional agreement to take the franchising business for the Stirling Sports chain of sports goods stores off Mark Taylor’s Stirling Sports Franchises Ltd & Franchise Investments Ltd (in receivership since December).

Franchise Investments licensed the intellectual property rights in the Stirling Sports brand to Stirling Sports Franchises Ltd.

Receivership of The Building Depot chain of hardware stores last September brought about the collapse of RetailX Ltd, the franchising-based listed company which Mr Taylor headed.

RetailX is now in the throes of a reverse takeover. The separate Briscoe takeover of the Stirling Sports franchising business was raised last November.

Duke still needs Stirling shopkeepers’ support

Briscoe Group managing director Rod Duke said the agreement signed on Thursday was conditional on vendor shareholder approvals and commitments from a significant number of the existing Stirling Sports franchises to enter into a new form of franchise agreement.He said it was expected to take up to 2 months to satisfy those conditions.

Under the terms agreed, the consideration won’t be disclosed until the sale & purchase agreement becomes unconditional. Briscoe Group intends to pay cash for the business.The 32-store Stirling Sports chain generated $40 million of sales for the July 2004 year. At its peak, the chain had more than 50 stores & sales exceeding $50 million.Mr Duke said the Rebel Sport chain had been a clear leader in the sporting goods market since the late 90s and generated more than $100 million of sales/year from its network of 20 stores.”We believe we can make significant contributions to the success of the Stirling Sports franchises by utilising our existing strengths in a variety of areas. These include media arrangements, product sourcing, financial system, property management, human resources & loss prevention.

“Feedback to date from Stirling Sports franchisees has been constructive. We believe there is a high level of recognition of the potential benefits and we would expect this to translate into a high level of support for our involvement,” Mr Duke said. “The transaction also enables us to make a quantum leap forward in implementing our recently announced franchise network plans, to achieve market coverage beyond the major metropolitan areas. We see this as a significant ‘win/win’ opportunity for Stirling Sports franchisees & Briscoe Group, as well as for all the customers of both chains.”Mr Duke said Briscoe Group intended to maintain the Stirling Sports network under its own separate brand. “We see potential for further growth for Stirling Sports in areas that are not already serviced.

“Stirling Sports is well known and fits well as a smaller-format partner alongside Rebel Sport in the sporting goods market. In our dealings with the Stirling Sports franchisees we have been impressed with their enthusiasm & loyalty to the brand, and we regard that as a positive for the future.”

Briscoe annual result weakens

Although it’s Briscoe that’s undertaking the takeover, its own financial position weakened in the year to 31 January.

On 17 March, Briscoe announced a 19% fall in pretax profit, to $29.1 million, on revenue up 1% to $320.6 million, and a bottomline profit down 20.7% to $18.7 million.

Ebit fell 21.2% to $34.7 million. Earnings/share fell from 11.2c to 8.9c.

The company said its gross profit rose by 5.7% to $106.2 million, and the gross profit margin rose from 31.9% to 33.4%.

Mr Duke said the 0.92% sales increase wasn’t enough to cover increases in operating costs, ibncuding those associated with opening 6 new stores.

Same-store, Briscoes Homeware sales fell 4.8% and Rebel Sport fell 10.6%.

Earlier stories:

8 March 2005: Reverse takeover for RetailX

20 January 2005: Brett Wilkinson props up RetailX

19 December 2004: Briscoe warns of hefty 2nd-half profit cut

2 December 2004: RetailX reports loss as talks on future continue

1 November 2004: Briscoe aims at Stirling Sports takeover

4 October 2004: Retail Services to be wound up, RetailX to stay listed & be sold

14 September 2004: RetailX trading suspension over, but future still fuzzy

Website: Briscoe Group

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Briscoe Group Ltd’s directors said on Friday the company expected to make a lower full-year net profit after tax than previously indicated. They said November ended disappointingly, December trading started more slowly than anticipated and this was likely to bring a similar cut in 2nd-half profit to the $3.1 million first-half reduction.

In that event, net profit after tax for the full year to 31 January 2005 was likely to be $17.5 million instead of the previously forecast $23.6 million.

Managing director Rod Duke said: “It should be recognised that around a quarter of our total sales revenue each year is generated during December & January, and we are now only halfway through December. However, it is already clear to us that the earlier reductions in bottom-line performance will not be recovered before year end.”So far, December sales revenues are at higher levels than for last December, and full year-to-date sales & gross profits are both ahead of last year, but on a same-store basis year-to-date performance is down on last year. The lower than expected results are a reflection of a highly competitive market and of operating costs (including the costs of the 6 new stores opened during the year) that increased more than the increase in gross profits.”

Rebel Sports owner Briscoe Group Ltd (managing director Rod Duke) is discussing the takeover of the franchise rights to the opposition 38-store Stirling Sports chain from Mark Taylor, whose listed RetailX business fell apart when receivers were called in to The Building Depot in September.

Mr Taylor, of Christchurch, took over his father Colin’s franchising business, listing it in 2000 as RetailX Ltd. It held management contracts with Stirling Sports and The Building Depot through a subsidiary, Retail Services Ltd.

Mr Duke said today Briscoe had offered to acquire the rights held by Stirling Sports Franchises Ltd, controlled by Mr Taylor through a family company, with several other smaller shareholders.

Briscoe would provide a range of centralised services to franchisees.Mr Duke expected an agreement could be concluded by mid-November, subject to due diligence.The Stirling Sports chain’s 38 stores reportedly generated $40 million of sales for the year to July 2004.

“We believe we can make significant contributions to the success of the Stirling Sports franchisees, by utilising our existing strengths in media arrangements, product sourcing, IT systems, stock management & many other facets of our operations. It also enables us to make a quantum leap forward in implementing our recently announced franchise network plans, to achieve market coverage beyond the major metropolitan areas,” Mr Duke said.

He announced plans for that network on 15 October. The current Rebel Sport chain will increase to 20 this month with the opening of a new store in Riccarton, Christchurch. Mr Duke said the company would continue to roll out large-format Rebel Sport stores in parallel with the new franchise initiative.Earlier stories:

1 October 2004: U: The names behind the action, the week to 3 October 2004  (New receivers at Building Depot)

24 September 2004: RetailX directors say company should stop trading

22 September 2004: RetailX postpones agm because of Building depot receivership

14 September 2004: RetailX trading suspension over, but future still fuzzy

Briscoe Group Ltd’s sales fell 1.3% in the July quarter, compared to that quarter last year, to $71.4 million.

The gross margin percentage generated for both the first & 2nd quarters was significantly ahead of the percentage in the same quarter last year, but this was more than offset by higher operating costs, reflecting the impact of new stores opened.

Briscoes Homeware sales for the quarter fell 8.9% to $47.3 million, while Rebel Sport sales rose by 18% to $24.1 million. On a same-store basis, Briscoes Homeware sales fell 11.8% while Rebel Sport sales were 1.2% behind last year.

Same-store, the group’s sales for the quarter were 8.9% behind the 2nd quarter last year.

Relocation of the Briscoes Homeware store in Hastings in June and a new store opening in the Coastlands Shopping Centre, Paraparaumu, at the end of July brought the number of Briscoes Homeware stores to 31 and increased total store area to 62,915m². Rebel Sport store numbers and store area remained unchanged at 18 and 37,174m².

Unaudited group sales for the 6 months to 31 July fell 1.6% to $138.7 million.

Group managing director Rod Duke acknowledged the “small decline,” but said there had been a promising response to strategic actions to reposition both brands.

“These strategic actions have included the scaling back of the frequency of discount events – replacing the sales programme with fewer but significant events, and initiating actions to improve stock ranging and improve customer service levels.

“The decision for Rebel Sport to obtain naming rights sponsorship of Super 12 rugby generated tangible benefits through the quarter just ended.”

Mr Duke told the annual meeting in May the first-half profit would be affected by lower sales & the extra costs associated with opening 9 new stores since the start of 2003.

“The directors expect first-half tax-paid profit to be between $3-3.5 million below the $9.8 million reported for the first half of last year.

“The half yearly result is scheduled for release by 6 September and this is expected to confirm that the business fundamentals remain strong despite the disappointing profit figure, which mostly occurred in the 3 months to 30 April.

“Recent months have shown a marked improvement in terms of the bottom line, with a particularly pleasing performance from Rebel Sport, in large part due to the strategic changes implemented.

“Gross margin percentage is significantly above last year, cash position is strong and stock levels have improved continually.

Briscoe Group Ltd has sold its Rebel Sport property in Nelson in a sale & leaseback transaction settling by 1 August. Briscoe bought the site in October 2002 and opened the Rebel Sport store there in April 2003.

The company said it had also signed agreements to establish new Briscoes Homeware stores in the Coastlands shopping centre at Paraparaumu, opening at the end of July, and in Takanini, opening by the end of October.

The Briscoes Homeware stores in Hastings, Tauranga & Whangarei will move to new premises in the next 3 months, a new Briscoes Homeware store will open in Riccarton, Christchurch, in November and new Rebel Sport stores will open in Whangarei in September & Riccarton in November.

Briscoe Group Ltd’s sales fell 1.9% in the 3 months to 30 April, to $67.3 million.

Group managing director Rod Duke said same-store sales were down 8.9% but the gross margin overall was significantly ahead.

He said the improved margin performance reflected strategic steps previously announced to redefine the positioning of the Briscoes Homeware and Rebel Sport brands by balancing their “price” message with those of quality, recognised brands & value, and to reduce thegGroup’s dependence on regular low-price sales. Briscoes Homeware sales fell 2.73% to $45.2 million, same-store 4.74%, while Rebel Sport sales fell 0.14% to $22 million, same-store 17.86%.

“The disappointing sales performance is primarily a reflection of the markets within which Briscoes Homeware and Rebel Sport stores have been operating, but it also reflects the change in strategy which we always expected to impact negatively on short term sales.

“The gross margin percentage improvement from the strategy change has certainly been better, and occurred faster, than we anticipated. However the under-performance in sales has impacted on the first-quarter profit in comparison to last year and it is unlikely that all of the shortfall will be made up during the 2nd quarter.” The Rebel Sport chain increased to 37,174m² in 18 stores when a new Rotorua store was opened in April.

Briscoes Homeware still has 30 stores, but the Rotorua outlet was moved in April, taking total floor area to 60,613m².

Briscoe Group Ltd increased net profit after tax by just $60,000 to $23.62 million in the year to January, on operating revenue up 6.6% to $317.3 million, ebit (earnings before interest & tax) up 4.1% to $34.7 million and gross profit up 8.2% to $100.5 million.

Briscoe will pay a fully imputed 4.25c/share final dividend, taking the year’s total to 7c/share, consistent with its policy of distributing at least 60% of tax-paid earnings.

The result is better than the revised estimate issued on 4 February, when directors said they expected profit to fall 4%. That turned out to be based on unduly conservative estimates of year-end provisions. After-tax profit was held down by lower interest income & provisioning of a $450,000 tax expense for amortisation of the final Rebel Sport franchise fee payment.

The gross profit margin rose from 31.4% to 31.9%. The company said it increased gross profit after focusing on stock management, investing more in preventing loss, and as a result of the rising strength of the dollar.

The company increased Briscoes Homeware floorspace by 6.3% to 59,922m² after opening stores in Lower Hutt & Cambridge, and increased Rebel Sport floorspace by 38% to 35,417m² after opening 5 stores, in Nelson, Hastings, Lower Hutt, Porirua & Tauranga. After moving to calendar month-end reporting last year, the latest period had 4 fewer trading days. Adjusting for those and on a same-store basis, sales grew 3.4%. The Homeware increase was 6.2% but Rebel Sports sales fell 2.9% on that basis.

Net operating cashflow rose from $9.5 million to $25.4 million.

The company plans to open 3 Rebel Sports stores this year, in Rotorua, Whangarei & Riccarton, taking the total to 20. It will open a Briscoes Homeware store in Riccarton and relocate 4 stores, in Hastings, Rotorua, Whangarei & Tauranga, taking that brand to 31 stores.