Growth curve of 3 NZX 50 Retail stocks to continue in 2021?

  • January 16, 2021 05:50 AM AEDT
  • Team Kalkine
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Growth curve of 3 NZX 50 Retail stocks to continue in 2021?

Summary

  • 2020 ended on a positive note for the retail sector of NZ.
  • Retail sector witnessed a surge in retail sales values in the September quarter of 2020 after a historic fall in the June quarter.
  • Revenues for Kathmandu Holdings surged by 72% in Q1 ended 31 October 2020 on pcp.
  • Briscoe Group witnessed about 15% rise in sales for Q3 of 13 weeks ended 25 October 2020 compared to pcp.
  • Michael Hill International reported strong sales and margin performance in FY21Q1.
  • Significant challenges remain for the NZ retail sector ahead.

 

Retail sector, which serves as a medium for a substantial component of household consumption and shopping by foreign tourists, is a significant part of the NZ economy. NZ tackled coronavirus pretty well helping businesses with schemes like wage subsidy.

After witnessing a historic fall in the June quarter, retail sales values experienced the largest rise in the September quarter of 2020 since series began in 1995 (as per Stats NZ).

Retail trade survey done by Stats NZ for the September quarter of 2020 showed that the total value of retail sales increased 7.4% to $1.8 billion while the total volume rose by 8.3% in the quarter.

 

Expenditure on key household items, vehicles and groceries added to a robust 7.4% increase in total retail sales compared to the same quarter in 2019. About 12 of the 15 industries witnessed higher sales values for the September quarter compared to the same period in 2019.

The sector also witnessed strong results in November on the back of Black Friday, Singles Day and Cyber Monday shopping events. Kiwis spent their money while they stayed at home while also taking the benefit of low interest rates.

Let’s have a look at the performance of these 3 NZX listed retail stocks.

Kathmandu Holdings Limited

 

Kathmandu Holdings Limited (NZX:KMD, ASX:KMD), outdoor clothing and equipment retailer posted record sales for FY20 ended 31 July 2020 after its acquisition of Rip Curl in October 2019.

The Company kept up the impetus in the following quarter with revenues surging 72% for Q1 ended 31 October 2020 compared to the same quarter of 2019.

Some of the highlights of KMD’s performance included the following:

  • EBITDA for Q1 of FY21 was in line with 2019, which included government subsidies and the realisation of cost synergies.
  • Group online sales rose by 37% during the period of 16 weeks to 15 November while wholesale sales fell 14.4% in Q1 ended 31 October on pcp.
  • Group’s direct-to-consumer (DTC) same-store sales for the 16 weeks ended 15 November fell 7.6% on a pro-forma basis from the year-ago period, adjusted for lockdown closures.
  • Rip Curl’s sales climbed 26.8%, but those of Kathmandu’s tumbled by the same percentage (-26.8%) on pro-forma basis.

 

The Group maintains a robust balance sheet and liquidity position, permitting it to respond to the present trading requirements and pursue more growth prospects in the future.

 

On 15 January, KMD was trading at $1.31, up 1.55% from its last trade.

 

Briscoe Group Limited

 

Briscoe Group Limited (NZX:BGP, ASX:BGP) continued with strong sales momentum in Q3. The Group recovered to generate double-digit revenue growth for another quarter despite trading disturbances caused by COVID-19.

Briscoe Group announced sales of $161.3 million for Q3 of 13 weeks ended 25 October 2020, up by 14.97% compared to pcp.

ALSO READ: NZX-listed growth stocks that can be considered in 2021

Some of the highlights of BGP’s financial for Q3 (27 July 2020-25 October 2020) included the following:

  • Homeware sales stood at $98.7 million, up 12.28% for the quarter compared to the same quarter in 2019.
  • Sporting goods sales stood at $62.6 million, up 19.48% relative to pcp in 2019.
  • Group’s online sales witnessed impressive growth in Q3 and represented 16.3% of the total Group sales.

 

Briscoe Group also successfully repaid $11.5 million wage subsidy taken from the Government amid strong sales recovery and lower possibility of another lockdown.

On 11 December, the Group also declared to pay a special fully imputed dividend of 6 cents per share to shareholders. The dividend would also include a supplementary payment to overseas shareholders of $0.010588 per share and is due to be paid on 20 January 2021.

On 15 January, BGP was trading at $5.26, down 1.13% from its last trade.

 

Michael Hill International Limited

 

Michael Hill International Limited (NZX:MHJ, ASX:MHJ), jewellery retailer, continued with strong sales and margin performance for 22 weeks ended 29 November 2020. The Company posted a robust growth in both same store sales and gross margin for the October/November period.

Michael Hill released a trading update on 15 January on its second quarter results for FY21.

Some of the highlights of MHJ’s financial for second quarter ended 27 December 2020 included the following:

  • Retail revenue across same stores in all markets witnessed growth of 5.6% for the second quarter of FY21 and 6.3% for H1 FY21 on pcp.
  • Margin growth in all markets and channels of 150 to 250 bps for H1FY21 against prior year
  • There was a rise in online sales of 102% for H1 FY21, leading to digital sales accounting for 5.8% of total sales.

ALSO READ: Michael Hill (ASX:MHJ) shares light up on rosy trading update

The Company is expected to deliver an increased Group EBIT result for H1FY21 of $56 million -$60 million compared to $31.6 million in H1FY20. The corresponding EBIT excluding gross wage subsidies is forecasted to be between $41 million to $45 million, up 30-40% over H1FY20.

 

The Board also resolved to pay outstanding debt on 29 January 2021, which was due to be paid on 30 September 2021.

 

On 15 January, MHJ was trading flat at $0.78, up 6.85% from its last trade.

 

Outlook for the Retail sector

 

The year 2020 has been quite positive for retailers, but the retail sector faces some major challenges ahead.

 

These hurdles include solving supply chain hurdles arising from COVID-19, searching and retaining skilled employees, and reinventing goods and processes to satisfy increased market demand for more affordable goods.

 

ALSO READ: 5 Tips for revival of NZ businesses in 2021

 

Further, significant cost increases due to a rise in minimum wages and sick leave entitlements for part-time workers remains another major obstacle for the sector.

 

Further, how the NZ economy unfolds in 2021 remains a question that would determine the retail sector’s opportunities and challenges. Tougher economic circumstances are likely this year, leading to reduced spending by consumers.

 

(NOTE: Currency is reported in NZ Dollar unless stated otherwise)

 

 

 

 


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