Edgy sharemarket dips ahead of results season

An edgy New Zealand sharemarket registered another small loss just before the latest company reporting season, but retailer Briscoe Group again came up with the goods.

Wednesday, August 9th 2023, 6:29PM

by BusinessDesk

The S&P/NZX 50 Index traded in a range of 11,835.78 and 11,868.75 before closing at 11,838.26, down 30.49 points or 0.26%. It was the third successive fall this week.

There were 60 gainers and 63 decliners over the whole market on volumes of 19.79 million shares worth $86.15m. Utilities investor Infratil, up 1c to $9.945, was active with $16.73m worth of shares changing hands.

In the United States, Moody’s cut the credit rating on ten regional banks, with some of the bigger ones put on downgrade watch. Moody’s cited deposit risk, potential recession and struggling commercial real estate portfolios.

This sent the major indices falling, with the Dow Jones Industrial Average down 0.45% to 35,314.49 points; S&P 500 declining 0.42% to 4,499.38, and Nasdaq Composite decreasing 0.79% to 13,884.32. The latter two have fallen on five of the last six trading days.

Paul Robertshaw, chief investment officer with Octagon Asset Management, said the local market felt a bit nervous and fragile about the earnings downgrades coming through – though Fletcher Building was a one-off (with the additional $105m provision for NZ International Convention Centre).

“Restaurant Brands [the stock was unchanged at $5.20] has had a horror show with its [profit] margins miss, KMD Brands is experiencing slower sales, Mainfreight had an earnings downgrade, and people are worried about Freightways.

“The gentailers and Auckland International Airport are holding up, and investors are wanting stocks with defensive earnings,” Robertshaw said.

Briscoe stands out

“But Rod Duke and Briscoe have done it again. Their sales are only down a little bit in a competitive space of general merchandise. They have a simple business model and have done a great job compared with The Warehouse, and Hallenstein Glasson, which has been volatile,” he said.

Briscoe Group increased 10c or 2.16% to $4.74 after reporting a steady sales performance for the half-year ending July. Group sales increased 0.35% to $369.2 compared with the same period last year, with homeware up 0.28% and sporting goods 0.46%.

The group is expecting a half-year net profit of more than $42m, compared with $45.6m in the previous corresponding period, and said it would be difficult to replicate last year’s record net profit of $88.4m.

Briscoe told the market the retail environment continues to be difficult and unpredictable, and the widely reported explosion in retail crime continues to have a significant operational and economic impact. The Briscoes and Rebel Sport group have increased their security capital expenditure.

Briscoe is focussing on its gross margin and protecting half of the 633 basis points gained during the previous two years ending January. The group expects gross profit margin percentage to be about 200 basis points below last year and doesn’t think it will have the same decline in the second half year.

Among other retailers, Hallenstein Glasson was down 15c or 2.45% to $5.96; The Warehouse declined 2c to $1.70; Michael Hill decreased 1c to 99c; and KMD Brands was up 1c to 91c.

Fisher and Paykel Healthcare declined 36c to $23.51, with American respiratory competitor Vapotherm overnight downgrading its earnings guidance.

Ebos Group fell 80c or 2.19% to $35.70; Mercury Energy was down 9c to $6.53; Summerset Group declined 13c to $10.07; Skellerup Holdings decreased 7c to $4.29; Fletcher Building shed 5c to $5.39; and Freightways was down 12c to $8.35.

PGG Wrightson declined 9c or 2.1% to $4.20; Millennium & Copthorne Hotels NZ was down 9c or 4.52% to $1.90; ikeGPS shed 2c or 2.7% to 72c; Move Logistics decreased 3c or 3.61% to 80c; 2 Cheap Cars fell 4c or 7.02% to 53c; Winton Land was down 4c to $2.42.

Contact Energy was up 6c to $8.36; A2 Milk increased 54c to $5.62; Stride Property gained 5c or 3.47% to $1.49; NZME added 3c or 3% to $1.03; and Comvita improved 6c or 1.8% to $3.40.

Accordant Group was up 3c or 2.56% to $1.20; Vista Group gained 4c or 2.22% to $1.84; and Just Life Group rose 4c or 10.81% to 41c. ArborGen Holdings, down 0.001c to 18.9c, has bought a eucalyptus nursery in Brazil, which can produce 15m seedlings a year for $5m.

ArborGen is one of the largest commercial suppliers of eucalyptus and pine seedlings in Brazil, with seven nurseries and production capacity of 80m seedlings a year, plus contract growing supplies of 50m.

General Capital, up 0.003c or 3.75% to 8.3c, told the market that Borneo Capital had sold the shares, representing 0.06% of its issued capital, it bought on-market in mid-June. The purchase was a potential breach of the Takeovers Code, and the Takeovers Panel is taking no further action.

(This story has been corrected to fix a typo in the headline)

Tags: Market Close