Breville heats up with 40% earnings increase on United States push

Iconic appliance maker Breville has shocked the market by announcing it expects a 40% increase in its earnings before interest, tax and depreciation for the 2012 financial year – and much of it is due to growth in the United States.

Breville said in a statement it expects EBITDA of between $72-$73 million, compared to last year’s result of $52.9 million.

It comes just months after the business posted a 41% increase in net profit for the first half of the year. Much of the company’s growth during that time also came from the United States, it said.

Brian Walker, managing director of retail consultancy Retail Doctor Group, says while it’s too early to tell how the company has performed, given there are no sales or revenue data, the result is an encouraging one – and evidence of a strategic response to poor conditions at home.

“What I think they’ve done particularly well is identified their market segments,” he says, referring to the push into the United States.

“If you look at some of the profit returns in this country, the incumbents produce less profit than the new entrants, and that’s true when you think of newer businesses such as Zara and so on.”

“So I suspect they’re making a new impact into a much larger market, and seeing a return on their invested capital. They’re reaping the rewards of a global strategy.”

Acting chief executive Jack Lord even said in the company’s announcement the growth in North American sales had been a key factor in the result.

“The group’s very pleasing performance was underpinned by the strong result achieved with Breville designed and developed products in North America and the Keurig distribution businesses in Canada.”

“The Australian and International Distributors businesses also showed growth in the second half after a difficult first half.”

Breville has established a solid business in Australia for decades but more recently it has been pushing more and more in the United States. One of its appliances was featured on Oprah back in 2007, and its products have taken on new life internationally on ecommerce sites such as Amazon.

But while Breville suggested the Australian business has only just managed to record some growth in the second half, there is some hope – Access Economics economist David Rumbens says the homewares market is set to pick up during the rest of the year.

“It has picked up, and we are expecting that to continue as property starts to bottom out and then increase.”

Official retail data is due out tomorrow which will provide a better picture of how the market will proceed, Rumbens says.

 

 

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