Amongst the gloom that is the retail sector, Briscoes has managed to post a reasonable earnings number of $10.3m for the half year to July 2011 – up around 11% on the previous half year.  Despite consumers spending less and facing higher petrol and food prices, Briscoes has seen reasonable demand for homeware products (two-thirds of its revenue) and Rebel Sport has found itself a benefactor of the RWC, with satisfactory demand for its sporting goods.  The result of this activity has been a gross margin for the Briscoes Group that sits just below 40%, slightly up on the previous comparable period.  Rod Duke knows and understands the business of retailing.  Tough management of costs and astute inventory management when the business revenue line is flat, while continually pushing for efficiencies in space allocation and business format all help the bottom line.  Reducing stores that don’t meet expectations – 5 Living & Giving stores were closed during the period – and driving more bang-for-buck from marketing, have been beneficial for the business.

But what’s happening elsewhere in retail?  The Warehouse will report flat earnings later this week and Pumpkin Patch is struggling, especially in Australia.  Wherein lies the contrast between these businesses and Briscoes?  Much of it has to be in the store formats and the appeal (or otherwise), of their product and price points.  The Warehouse needs a reinvigorated format and all eyes will be on the new CEO in terms of his strategy for the future, while maybe market demand has moved past Pumpkin Patch.  The Pumpkin Patch business is losing ground to other similar quality children’s clothing and particularly clothing purchased over the web.  The challenge for retailers is not only to keep ahead of changing economic conditions but also to make sure that they are aware of structural shifts in the markets.  Is their proposition still relevant for the consumer and is their shopping experience still competitive?  Briscoes appears to be ahead of the trends while questions remain as to where Warehouse and Pumpkin Patch are positioned.  There is no substitute for a good understanding of consumer tastes, spending patterns and market trends.  Those companies that miss the structural and demographic shifts in spending by wholly blaming the economy will be slow to recover earnings. 

Graeme Thomas