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Breville Lifts Margins In Challenging Market

Breville has lifted gross profits by 6.4% during a time when the cost of a cup of coffee has risen, and consumers have turned to Breville coffee machines to brew their own, lifting Australian business margins overall.

According to CEO Jim Clayton, retailers are “de-stocking” resulting in the global Australian appliance brand having to carry more stock, a move that has put pressure on the company he claims.

APAC grew 5.0% against a difficult backdrop, with market share gains in ANZ and sell-out growth in both halves supported by strong NPD launches.

But despite global pressure, the Australian business delivered revenues of $1.47 billion up 4.2% from the $1.48 billion in 2022.

Gross Margin was also up to 35% from 34.3%

The business has delivered three strong years of growth in FY20-22 25.3%, 24.7% and 19.4% respectively with further growth tipped.

Overall inventory levels were “relatively flat” according to management, with core inventory managed down $96.6m through reduced 2H23 purchases rather than discounted sales.

Commenting on the Group’s result, Breville Group CEO, Jim Clayton said: “A solid year of performance for the Group, despite a challenging and dynamic backdrop with a subdued consumer, inflationary headwinds, a strong denominator, and retailer destocking”.

He said that Breville has doubled the size of the business in the last 5 years, with the Middle East compensating for a drop off in the USA as Bed Bath and Beyond slowly exited the market.

He said that their global product segment grew revenue by 8.5%, and gross profit by 9.8% however their mass market segment declined by (16.9) % and (18.9) % respectively, led by weaker demand for Nespresso Distribution products.

In the global product category, strong sales came from the Barista Express Impress, the Barista TouchTM Impress, the Vertuo Creatista, the Joule Oven Air Fryer Pro, the Joule Turbo Sous Vide, and the Baratza Encore ESP.

Key contributors were coffee and cooking, as consumers gravitated to premium espresso coffee and air-fryers.

As for food prep juicers, blenders, and food processors – these categories proved more discretionary and declined year-on-year.

The bankruptcy of Bed Bath and Beyond (BBB), one of the company’s largest retail customers in the U.S., “added volatility” to the business claims management.

The company said the financial year ahead appears similar to FY23, with macro headwinds playing against company-specific tailwinds, including new product launches, maturing new geographies, solution plays, and cost improvements.

They claim that it is too early to predict how these forces will play out across the whole year, but our expense budget is again set with flexibility to deliver EBIT growth under a range of probable revenue scenarios.

David Richards contributed to this story. 



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