You can't keep a top retailer down. Since 1990, when Rod Duke bought control of Briscoes, he has transformed it from a small chain of loss-making shops offering a sparse range of tawdry goods into one of the country's most upmarket and successful retailing groups.
It seems as if the homeware stores which bear the Briscoe name may be reaching the end of their strong growth phase, which has seen their development into a chain of 37 attractive shops in major centres. It plans to open only one new store a year over the next few years till it reaches between 40 and 45.
But that doesn't mark the end of Duke's ambitions. He opened six new Rebel Sport stores in the past year, bringing the total to 27, and intends to open a further one or two over the next few years until he reaches about 35. Rebel Sport's Australian operations are in the throes of a takeover battle, with major institutions holding out for a higher offer, although this does not affect New Zealand. In 1990, Duke negotiated a limited franchise agreement with Rebel Sport Australia, with the first store opening in Auckland in 1996. He gained exclusive rights to the Rebel Sport brand in this country in 2005.
Duke says there is great potential in the Living & Giving chain, which he bought from Eric Watson late last year. This chain of nine stores had never performed well, and was said to have been operating around break-even at the time of the sale. Duke believes they have a lot of promise, and plans to open 11 more in the next two years till he gets to 20.
He also intends to expand the upmarket Urban Loft chain, after the success of the first one in Auckland. A second could be opened soon in Wellington or Christchurch.
The ongoing expansion plans are being encouraged by signs that, after the odd rough patch, the company has developed successful strategies to win customers in a small, highly competitive market.
The group has just completed another successful year - regarded as a good effort after a difficult and testing second half. Other retailers who have reported challenging trading - mainly because of poor, cold early summer weather - include The Warehouse, Hellaby Holdings, owner of Hannahs and No1 Shoe stores and the BBQ Factory. In contrast, Michael Hill International, who had been finding business difficult earlier in the year, surprised the market by saying it had a bumper Christmas.
Clothing and footwear shops seem to have been the hardest hit. This seems to have affected Rebel Sport - the part of the group most exposed to selling sports apparel and shoes. Duke said: "When it is snowing in the South Island it is very difficult to sell outdoor shirts and shorts at Rebel."
There are indications the group undertook a sales programme to sell such seasonal stock and maintain market share. Sales at Rebel Sport rose by 5.4%, and Briscoes Homeware sales were up 9.8% in the latest period.
The group reported a full-year tax-paid profit of $26m, broadly in line with a forecast it made in January. Sales were up 8.3%, mainly due to new store openings, and a 10.4% increase in retail space, or selling area. Like other retailers, Briscoes is facing a substantial rise in rents: Carolyn Holmes of ABN Amro estimates rent per square metre rose by 4.3% in the past financial year, and she is forecasting this will rise another 3% this year.
Duke warned after the result that the group faces another tough year. He hopes to consolidate profitability after what he said had been the most challenging three years the company had ever faced. Immediate worries were petrol prices, household expenditure, interest rates and the housing market.
Rodney Deacon of Goldman Sachs JBWere says the outlook for earnings growth in the short to medium-term looks subdued, driven mainly by factors including lower household consumption, the kiwi dollar and a slowing retail environment. Goldman Sachs JBWere has a short-term market perform and long-term hold recommendation on the stock valuing it at $1.66.
First NZ Capital believes the company will report similar earnings this year and has a target price of $1.72 on the shares. ABN Amro rates it a hold with a target price of $1.84. UBS has a neutral recommendation and a price target of $1.71.