Managing Director’s Address to Annual Meeting 24 May 2018

Managing Director’s Address to the Annual Meeting
24 May 2018
Thanks Rosanne.
Looking back at 2017
I’m going to start by taking a look at the year just gone, and then I’ll talk about the work
we’re doing on various fronts to ensure the business remains in very good shape to meet
the challenges and opportunities ahead of us.
Financial Performance
It was very pleasing to see another year of sales growth. Total sales were up by 3.5 percent
to $603.1 million – and great to surpass $600 million in revenue for the first time, same-
store sales grew by 3.1 percent. Our online business grew sales by more than 30 percent.
Net profit after tax (NPAT) was $61.3 million. 3.2 percent up on $59.4 million in the previous
year.
For context, the previous year’s NPAT of $59.4 million had included one-off benefits
totalling $2.7 million from property sales in Hastings. Adjusting for those, the underlying
increase in the latest year was 8.2 percent.
Earnings before interest and taxation grew by 4.4 percent to $83.4.
There was a small decrease in gross profit margin, from 41.1 percent to 40.5 percent, as a
function of intense competition across the retail sector and competing claims on the
consumer dollar.
As Rosanne has already outlined, there were quite a few interesting challenges to overcome
and those were generally dealt with successfully. The results can be seen as a good
reflection of our determination to provide customers with an outstanding shopping
experience, in-store and/or online, together with a very tight focus on inventory
management and cost control. At the sharp end, our in-store and support teams have
combined to execute our plans and I am really grateful for their efforts.
Our store network
The growth and enhancement of our store network remained a priority, with $14 million
invested to that end. That included $5.4 million to develop properties in Wellington City,
Petone, Mt Albert and Silverdale; $6.4 million to fit out and refurbish new and upgraded
stores; and more than $2 million in upgraded security camera systems, online platform
improvements, enhancements to system software and hardware upgrades.
The various upgrades were well-canvassed in our Annual Report, so I’ll just summarise them
today:

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o The closure of Briscoes Homeware stores at Lower Hutt and Petone and the Rebel Sport
store in Lower Hutt; and their replacement by new Briscoes Homeware and Rebel Sport
stores as part of our development at Petone
o New Briscoes Homeware stores in Rangiora and Glenfield
o The refitting of Briscoes Homeware stores in Botany and Henderson
o The extension of the Briscoe Homeware Takanini store to improve the shopping
environment and match the demand anticipated from residential developments
currently under way
o Extension of the Lyall Bay Rebel Sport store, which allowed a significant extension in its
product range
o The refit of Rebel Sport Albany, producing a great improvement in the “look and feel” of
the store.
Just into this current financial year we opened a Rebel Sport store in Kerikeri, next to
Briscoes Homeware, allowing the sharing of warehousing and back-office facilities. We
intend to complete similar projects in Tauranga and Rotorua. The work planned for Rotorua
will also improve fulfilment capability for our online platform in the Central North Island.
We are well advanced with plans to relocate Briscoes Homeware in Northlands, in
Christchurch; and to add a new Rebel Sport store to that location. We are currently
considering refits at a number of stores including Rebel Sport at the Atrium, in Auckland
City, and in Manukau; and Briscoes Homeware at Manukau and Lyall Bay.
Earthquake strengthening work will give us the opportunity to refresh the Briscoes
Homeware and Rebel Sport stores in New Plymouth; while a planned upgrade to the lighting
at Rebel Sport Botany will both improve the look of the store and reduce power usage.
We installed new security cameras in a number of stores during the past year and we expect
to complete the upgrade across our whole network by the end of calendar 2018.
Issues and challenges
As Rosanne has said, there is a lot happening in retail, both in New Zealand and
internationally. While the competitive forces are both varied and significant, this is actually
a good thing for us – it sharpens our focus on what we are doing in the business and what
we need to do to maintain the strength of our market position.
Our major focus is on making it easy and attractive for our customers to do business with
us. That means providing them with the opportunity to purchase in the way that suits them,
whether that’s in-store or online, or perhaps a combination of both.
Over time, it seems likely that the number of customers who purchase only in-store or only
online will decline, and the numbers we refer to as “multi-channel” customers will increase.
The ability to serve our customers well on both our physical and online platforms is a source
of competitive advantage for us. The work we have been doing to build our online platform,
which has been very successful, should be seen in this context. The online channel now
represents around 8 percent of our total revenue.
We are currently engaged in a full upgrade of our online platform to make the shopping
experience even more enjoyable. That is a major design and implementation exercise – it’s
going well and we expect to launch the new platform before the end of the year. In the back
room, so to speak, new fulfilment hubs in Whanganui and Hamilton are already up and
running.

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We are also expanding the click-and-collect option to more stores after a successful trial
through the Botany homeware store. Click-and-collect allows customers to order online and
pick up in-store. While this might seem counter-intuitive at first, it is a significant growth
area and one we are obviously keen to facilitate.
The growth in online trading has been much discussed for several years now, and you will
most likely be aware that Amazon has now established facilities in Australia, which of course
has potential for flow-on effects in New Zealand. We have not seen any substantial effect in
New Zealand to date, but we have no doubt that Amazon’s presence will grow. Beyond that,
other platforms might also seek to expand in this part of the world.
We’re not, and never will be, complacent about that. We will be keen observers of their
development and our focus on building our own online presence will continue. That’s all in
the context of enhancing the relationships we have with our customers, and doing so in a
way that builds on our commitment to excellent service, to deepen our knowledge of our
customers and their needs, and our determination to make quality homeware products and
sporting goods available to a broad range of customers.
We were pleased to see the government assisting to level the playing field for locally-based
retailers by announcing its intention to remove the gst-free status of imported goods under
$400.
The case for doing this had become increasingly obvious. With the change due to take effect
in October 2019, I doubt we will see a measurable effect on our business in less than a
couple of years. Nevertheless, it is a welcome development that removes a competitive
advantage for overseas-based retailers and protects the New Zealand tax system at the
same time.
Another recent regulatory development is the continued increase in the minimum wage
rate and the government’s signal that it wants to see a rate of $20 per hour by 2020. We
are on track to deliver that within our business, from a starting point that we are already
above the minimum level for all employees.
Our view of the impact on the business is mixed – we recognise that wage inflation
represents extra cost and, of course, we are concerned to manage all costs as well as
possible. On the other hand, logic would suggest that the increase will lift the potential for
discretionary spending by households, and we would like to think that Briscoes and Rebel
Sport would see their share of that effect. Even that’s not simple, as the effect on spending
will be influenced in turn by factors like consumer confidence and competition.
The broader topic of employee entitlements appears to be an issue for numerous
businesses across many sectors.
Some of you may have seen recent media articles relating to paying people correctly for
morning meetings, end of day duties and holiday pay. We have given a commitment to our
employees that they will be paid for the work they have undertaken. Like many other
businesses we are working through the process to ensure we achieve this commitment.
At this point we do not believe the impact of the exercises being carried out above to be
material, however, we will of course provide updates in compliance with the NZX
continuous disclosure rules.

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The basics
At the end of the day, our focus always returns to the theme of doing the basics right. That
starts with understanding what the customer wants and doesn’t want. The SmartFeedback
system in our stores allows the customer to comment directly, and we gain extra insight
through the analysis of purchasing data from our stores and our online platform.
Marketing, sponsorship and merchandising are all part of what is a constantly evolving mix.
Marketing is the major component as measured in dollars; and, as I’m sure you will be
aware, it is subject to prolific change in technologies, media channels and creative
approaches.
As part of our response to those trends we are elevating the role of marketing within our
senior management team, so it will be closely aligned with group strategy and thus ideally-
placed to drive our performance. We have recently commissioned a search for a new role of
General Manager, Marketing and Strategy and we will report on the outcome of that
process in due course.
The basics also include ensuring we provide access to brands that customers know and
trust. In Rebel Sport that means famous names including adidas, Asics, Berlei, Canterbury,
Everlast, Gilbert, Head, Hi Tec, Icebreaker, Jockey, Kookabura, Mizuno, New Balance, Nike,
Oakley, Prince and Puma. In Briscoes Homeware it means Bodum, Brabantia, Breville,
Churchill, Cloud 9, De Longhi, Fieldcrest, George Foreman, Goldair, Gordon Ramsay, Habitat,
Hampton and Mason, Jamie Oliver, Joseph and Joseph, Royal Doulton, Panasonic, Russell
Hobbs and others. Part of our job is a continual search and review process to ensure we stay
ahead of the pack in this aspect of quality product offering.
We are also continuously engaged in the search for improved logistics – increasing the
speed with which we move products from the supplier to the customer, and managing our
inventory levels so that we make our products available where they need to be while
managing the cost of doing so. It was very pleasing to achieve a marked reduction in
inventory in the latest year – to $74.5 million compared with $78.9 million at the previous
year-end.
Sustainability
Those who attended last year’s annual meeting will recall that we heard from one of our
top-performing business managers, Sheryn Tamblyn, who manages our Porirua Profit
Centre. I know the opportunity to gain further insight into that aspect of our operations was
much appreciated. Continuing that approach, we have asked our GM Store Development,
Nick Turner, to join us today to talk about the steps we are taking to maximise the
environmental and social sustainability of the business.
Nick, welcome... the floor is yours.
Presentation Nick Turner – attached separately.
Thanks Nick – that was an interesting and informative insight into a topic of very high
importance for us.
We are fortunate to have people of Nick’s calibre working in our business.
The current year

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It now remains for me to update you on progress in the current year and the factors that
will have an influence on our performance.
The growth in our first quarter results was slightly softer than in the first quarter of the
previous year. Having said that, there were some significant seasonal factors weighing on
the result for Briscoes Homeware, in particular. The previous first quarter was very strong
for manchester and furnishings, overall homeware sales increased by 8.8 percent. It was
always going to be difficult to grow strongly off that high base. Also, the trading patterns
were very different, with Easter falling earlier than last year and outside the school holidays.
Balancing that, sporting goods sales remained very strong and the Group result for the same
three months was acceptable in both absolute and same-store terms.
To the extent they are predictable, our expectation is for economic growth and consumer
spending this year to be broadly consistent with those of recent years.
We will be watching for the effect of the competitive challenges posed by new and
emerging retailers; and by online platforms as I’ve already indicated.
First and foremost, we are focused on what we can control – the fundamentals of providing
value for customers and improving our systems, our store network and our online platform.
We will continue to invest in all of those in the interests of not just maintaining, but
building, our competitive advantage.
As ever, I am excited by the opportunities ahead of us. I have great confidence in our people
and in the path we are taking to strengthen our position as New Zealand’s leading retailer of
both homeware and sporting goods.
Thank-you.

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Hi everyone,
Today I’ve been asked to give you an update on where Briscoe Group is at in improving
our Environmental performance.
For some time, the team have been on a somewhat silent journey, working on various
initiatives to firstly understand where and how we can improve, and then setting out to
see exactly what we can achieve within each in each area of the Business.
We’ve broken down our initiatives into 3 areas that we believe are of key importance to
make the most meaningful improvements to the environment.
They are; Waste Management; Energy Efficiency and Carbon Footprint.
Governance and management reporting is also key to ensuring continuted Business
focus – and the team have built regular updates into weekly and monthly meetings to
support the sustainability initiatives.
For example, we have a monthly Sustainability meeting chaired by the Chief Operating
Officer where Senior Management check in with progress in their respective areas. We
also report progress to the Board in our monthly updates when there is tangible
progress to table.
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On screen is our sustainability mission statement which heads up our initiatives.
We believe that sustainability has never been more important.
The future wellbeing of the environment depends on rapid improvements in the way
businesses (and individuals) operate globally.
There can be no doubt about the devastating impact climate change is having on our
planet as a result of greenhouse gasses being trapped within the atmosphere and
oceans, which are increasing the earths temperature, changing weather patterns,
bleaching our coral reefs, and causing sea levels to rise.
There are still some that don’t believe in this phenomenon, but even those people can’t
deny the impact of plastic waste washing around in our oceans, & the subsequent
impact on marine and bird life.
Collaboration between manufacturers, supply chain, retailers and consumers will be key
to making improvements moving forward. There are plenty of examples already where
consumers are demanding more of retailers, and more of manufacturers and brands.
The current movement to remove single-use plastic bags from retail counters is probably
the most prolific example.
However, longer term we see consumer awareness increasing further – challenging the
product lifecycle, & perhaps even willing to pay more for products that last longer, or can
be easily fixed rather than thrown away.
The team at Briscoe Group are committed to reducing our impact on the Environment –
regardless of the driver or belief, as we know it is the right thing to do.
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I mentioned we’d been silently getting on with new initiatives. Well, just 4-5 years ago,
40-50% of all waste material generated by the Group ended up in a landfill.
About that same time we partnered with EnviroWaste and by consolidating all of our
waste and recycling services nationwide, over the last few years we have massively
increased our diversion from landfill, with approximately 85-90% of all waste streams
now recycled rather than dumped.
The majority of our waste is either recyclable cardboard or plastics used in the supply
chain. EnviroWaste have many exciting & innovative projects underway and they’re
building capability to truly recycle these streams into useful by-products within NZ,
without the need to use landfill or to ship waste overseas. Projects such as plastics to
oil, wet fibre plant (which will convert plastic recyclable material into wall product
similar to gib or into plastic desktops) and zero waste; and many more.
In fact, no greater than 5% of all of EnviroWastes total waste is shipped off shore.
We believe their focus on innovation and their demonstrable examples of investing in
these new technologies make EnviroWaste a great service partner to help us in our
journey to reduce waste.
[READ SLIDE]
Shrink wrap and plastics make up about 125 tonne; Mixed Recycling 60 tonne, and paper
and secure document destruction 46 tonne.
This year we have 14 initiatives covering Waste Management. From behaviours in Retail
Operations and audits of waste bins to seek new diversion opportunities, to auditing the
way we use packaging materials through the distribution centre and in our web
fulfilment centres. Just last week we received an email from one of our Customers called
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Sandra who was pleased with her online order:
“Kia ora. I recently made an online purchase and was impressed with the service and the
environmentally friendly packaging used, in terms of volume and choice of re-usable and
recyclable materials. Thank you for making a difference. Nga mihi, Sandra.
An example of perhaps one of our most searching initiatives is taking 5x auckland stores
and piloting a ‘Zero Waste’ trial programme which is due to start later this year.
Zero waste would mean operating in such a way that all waste is diverted from landfill
from those stores.
From lunchroom foodscraps being composted; to plastic, cardboard and metals being
recycled; and then finding innovative ways to deal with whatever is remaining.
Acknowledging that the source of our products is where we can make the biggest impact,
Our Buying team have one of the most important roles – specifying at source a reduction
in packaging, and applying as much pressure as possible to ensure we’re targeting
recyclable packaging materials in the most efficient quantities. Not just for use through
the supply chain, but also in reducing the end-user product packaging.
Much good work has been done in this regard, but there is still lots to do. Being at the
end of the global supply chain here in NZ makes this a more difficult challenge, however
pressure from consumers in all corners of the globe and from other much larger
international retailers, we expect manufacturers will be more amenable toward reducing
unnecessary packaging in future.
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Some of our suppliers are already well advanced on their own sustainable journeys.
For example one of our Briscoes bedware suppliers - Dri Glo in Australia – is launching an
innovative new product called Repreve.
Repreve is a recycled fibre that is eco-friendly made by recycling plastic bottles into a
yarn to make bedware products.
Fully certified, environmentally friendly and safe – product examples within their first
collection will include Duvet Inners, Mattress Toppers and Pillows - available in our
stores later this month.
Rather than have me try to explain how this process works, we have a short video to
show which best demonstrates how this product is made.
[PLAY VIDEO]
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Repreve products will be supplied in packaging that is designed to be re-used and the
packaging livery will encourage reuse.
Examples could be used as - good quality storage bags to store seasonal clothing; as a
portable toy bag; as storage for additional table and bed linen, or to collect old clothing
for donation..
Plastic portions of packaging will be made using PEVA rather than PVC.
PEVA doesn’t use chlorine in the manufacturing process – which is the most harmful
component within PVC.
PEVA is also a more environmentally friendly packaging solution and will be labelled so
consumers can see they are making a difference when selecting these products.
Other examples of product innovation and packaging reduction are demonstrated in the
left hand picture.
By transitioning 4x product ranges to self-fabric bags, within 6 months we have saved
over 43,000 PVC bags from coming into NZ.
That equates to about 4.3m tonnes of PVC now removed from the environment – and
what’s more our customers can feel the product without even having to open the
packaging.
In Rebel Sport, suppliers such as Puma are folding their garments tighter and smaller to
reduce the size of the product packaging; and Champion no longer send product hangers
as we recycle our hangers in store.
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This year Briscoe Group are committed to phasing out single-use plastic bags at
counters.
We’re currently in the throes of finalising a solution to change to a re-usable and
washable bag; which will be similar in design to those shown, and available to purchase
for a small fee.
Final details are yet to be confirmed, but we anticipate these being on offer well before
the Christmas season and we intend to transition from plastic to re-usable bags over a
series of months for our Customers to accustomise to the change.
Our staff are very excited about this initiative, and we’ve had plenty of feedback
supporting the change along with some great ideas to help our customers on this
journey as we transition.
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This year we have 7x initiatives relating to energy efficiency.
Our main focus is around ensuring new buildings use the latest efficient technologies,
and in providing reporting to our business managers so they can analyse their usage and
ensure equipment is being turned off after hours. We also target some capital
investment each year within our Store Development programme into upgrading old
lighting platforms and plant.
Last year, by maintaining a modern and energy efficient building spec for our new
developments, and in ensuring refurbishment projects included upgrades to LED lights,
we saw a reduction in consumption of over 9million units of power – equivalent to a
6.3% reduction in usage. This cumulative consumption is Total Group - it includes new
sites and expanded sites; so to achieve such a reduction of this magnitude really is a
highlight given the property portfolio grew larger last year. This demonstrates the power
of investing in energy efficiency.
Electricity generation has an impact on our carbon footprint, so continued investment in
energy efficient equipment will be vital for us to reduce our greenhouse gas emissions in
future.
This year we’ll also be reviewing our energy management policy covering the use of
powered equipment, to ensure efficient use of heating & cooling systems, and to
minimise unnecessary power wastage.
We’ll also professionally audit our lines network plans and have experts audit our 5
highest consumption stores (on a per sq/m basis) to highlight other ways in which we
can improve.
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Perhaps 2 of the most complex initiatives we have for the year relate to creating a
greenhouse gas report and understanding our carbon footprint.
We’re committed to establishing the report this year, and are currently working through
many data sources and streams of information required to generate this.
Once the report structure is complete, we’ll use 2018 data to set our baseline for future
comparisons, and then start looking for more ways in which we can reduce our
footprint.
I must give photo credit here to my sister Tracey –Tracey’s actually an aspiring ocean
scientist currently completing her Masters degree up in the Maldives which involves
measuring the impact from global warming on coral bleaching.
As you can imagine, I get plenty of unsolicited advice & ideas from Tracey!
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I trust the presentation has given you a window into many of the environmental
sustainability initiatives at play within Briscoe Group.
We’re very confident these initiatives will drive continued focus and improvement in our
environmental performance and ensure that eventually – ‘thinking and working
sustainably’ will engrain deeper within our culture.
Thanks for your time.
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