Birks Group, Inc. :BGI-US: Earnings Analysis: For the six months ended March 31, 2017 : June 28, 2017

Birks Group, Inc. reports financial results for the half-year ended March 31, 2017.

We analyze the earnings along side the following peers of Birks Group, Inc. – Signet Jewelers Limited and Tiffany & Co. (SIG-US and TIF-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 157.19 million, Net Earnings of USD 6.92 million.
  • Gross margins narrowed from 36.64% to 35.99% compared to the same period last year, operating (EBITDA) margins now 5.46% from 4.50%.
  • Year-on-year change in operating cash flow of % is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-03-31 2016-09-30 2015-09-30 2014-09-30 2013-09-30
Relevant Numbers (Semi-Annual)
Revenues 157.19 129.73 134 139.74 127.41
Revenue Growth (YOY) 17.31 -7.17 5.17 11.85 N/A
Earnings 6.92 -1.99 0.83 -4 -7.74
Earnings Growth (YOY) 733.49 50.3 110.72 29.68 N/A
Net Margin 4.4 -1.53 0.62 -2.87 -6.08
EPS 0.39 -0.11 0.05 -0.22 -0.5
Return on Equity 147.69 -89.23 26.44 -70.11 -116.76
Return on Assets 6.56 -2.13 0.87 -3.99 -7.62

Access our Ratings and Scores for Birks Group, Inc.

Market Share Versus Profits

Revenues History
Earnings History

BGI-US‘s change in revenue this period compared to the same period last year of 17.31% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that BGI-US is holding onto its market share. Also, for comparison purposes, revenues changed by 21.17% and earnings by 447.64% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s gross margins showed no year-on-year improvement. In spite of this, the company’s earnings rose, influenced primarily by the improvement in operating margins (EBITDA margins) from 4.50% to 5.46%. For comparison, gross margins were 36.09% and EBITDA margins were 4.33% in the last period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

BGI-US‘s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days have fallen to 53.82 days from 70.56 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

BGI-US‘s change in operating cash flow of % compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 2.59% to 3.98% and (2) one-time items. The company’s pretax margins are now 0.93% compared to 0.66% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Birks Group, Inc.

Company Profile

Birks Group, Inc. is a designer, maker and purveyor of prestige jewelry, timepieces and giftware in the U.S. and Canada. It operates through the following segments: Retail and Other. The Retail segment operates stores across Canada under the Birks brand, and stores in the Southeastern U.S. under the Mayors brand, store under the Rolex brand name in Orlando, as well as retail locations in Calgary and Vancouver under the Brinkhaus brand. The Other segment consists of e-commerce, gold exchange, and wholesale. It offers designer jewelry, diamonds, gemstones, precious metal jewelry, rings, wedding bands, earrings, bracelets, necklaces, charms, baby jewelry, timepieces and giftware. The company was founded on November 14, 2005 and is headquartered in Montreal, Canada.

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