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The Breville Group Ltd (ASX: BRG) share price is going nuts! Time to buy BRG?

The Breville Group Ltd (ASX: BRG) share price is up +15% today following the release of its FY23 results to the market.

After the BRG share price rallied strongly leading into the result, the BRG share price has now reached 12 month highs, but still remains below its $33 all-time peak achieved in August 2021.

Breville share price 

Breville result impresses

Breville sells premium kitchen appliances, including coffee machines, ovens, juicers, toasters, and kettles to a range of geographies globally.

The company delivered a strong result, with after-tax profit up +4.2% year on year to $110.2 million, ahead of consensus estimates of $107 million.

Key features of Breville’s result included:

  • +4.2% top line revenue growth
  • Gross profit margin resilience at 35.0% (above the prior period)
  • Debt reduced from the prior half
  • Dividend of 15.5 cents per share, fully franked

Breville’s inventory was ahead of consensus ($439.6 million vs consensus at $385 million). At Seneca, we’re still watching the inventory unwind following the covid sales boom with people loading up on home coffee machines. However, while high inventory can be problematic for some retailers, BRG’s inventory has a long shelf life (coffee machines don’t go out of fashion as quickly as clothes do!).

BRG announced a final dividend of 15.5 cents per share, fully franked, taking its total dividends per share to 30.5 cents for FY23 (30.0 cents in FY22). The record date is 14 September 2023, with the dividend payable 5 October 2023.

Breville’s outlook guided the market to further cash inflow expected as demand and supply chain predictability returns.

Why do we like Breville?

Breville meets our investment criteria, which has a quality growth bias. Regular Rask readers will know that I previously wrote about why BRG shares could trade higher based on its superior ‘cashflow return on invested capital’ (CFROIC) and its oversold share price. To summarise, BRG looked to be cyclically underearning relative to its historically strong cash returns generated for every dollar invested in the business.

Why PTM shares are a loser & BRG, CCP & JHX shares could ‘revert to the mean’

In the current climate of rising interest rates squeezing on consumer spending, the market was too bearish on Breville’s prospects leading into the result. On the contrary, the trend since covid of people spending more time around the house has benefitted the upcycling to premium Breville appliances.

In addition, Breville is rolling out its successful product range into new geographies which is a clear avenue for continued earnings growth. In the US, being a home barista is a relatively new idea and they’re used to poor-quality coffee (sorry Starbucks!). Call us biased, but the export of Australian coffee is a no-brainer for international markets.

Breville has a long history of product innovation (air fryers most recently) and has fellow ASX-listed retailer Premier Investments (ASX: PMV) on the share register, owning ~25% of BRG shares on issue.

What’s next for the BRG share price?

With broker upgrades expected across the board (they are too bearish in future years), we continue to have a positive view on BRG shares as a key holding in our large cap portfolios with a multi-year growth story.

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Seneca General Advice Disclaimer

This investment report was written by Luke Laretive, founder of Seneca Financial Solutions. Seneca holds an Australian Financial Service License (AFSL No. 492686) and is regulated by the Australian Securities and Investments Committee (ASIC). The information contained in this email is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. Luke Laretive, Seneca Financial Solutions, its Directors and its associated entities may have or had interests in the companies mentioned. Although every effort has been made to verify the accuracy of the information contained in this article, all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this email or any loss or damage suffered by any person directly or indirectly through relying on this information. Read Seneca’s Terms, Financial Services Guide, Privacy Policy.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

At the time of publishing, Luke Laretive or his clients may have a financial interest, for or against, any of the companies mentioned in this article.

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