Birks Group, Inc. :BGI-US: Earnings Analysis: For the six months ended September 30, 2017 : November 23, 2017

Birks Group, Inc. reports financial results for the half-year ended September 30, 2017.

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

Highlights

  • Summary numbers: Revenues of USD 49.83 million, Net Earnings of USD -5.67 million.
  • Gross margins widened from 36.09% to 37.60% compared to the same period last year, operating (EBITDA) margins now -6.65% from 4.33%.
  • 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 rose compared to same period last year, despite decline in operating and pretax margins.

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

2017-09-30 2017-03-31 2016-09-30 2015-09-30 2014-09-30
Relevant Numbers (Semi-Annual)
Revenues 49.83 157.19 129.73 134 139.74
Revenue Growth (YOY) -61.59 17.31 -7.17 5.17 11.85
Earnings -5.67 6.92 -1.99 0.83 -4
Earnings Growth (YOY) -184.97 733.49 50.3 110.72 29.68
Net Margin -11.38 4.4 -1.53 0.62 -2.87
EPS -0.24 0.39 N/A 0.05 -0.22
Return on Equity -51.67 73.84 -44.61 13.22 -35.06
Return on Assets -6.05 7.51 -2.13 0.87 -3.99

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 -61.59% 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 -68.30% and earnings by -181.97% 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 earnings declined year-on-year largely because of the increases in operating costs. Its operating margins (EBITDA margins) went from 4.33% to -6.65%. This decline in earnings would have been worse except for the fact that the company showed improvement in gross margins, from 36.09% to 37.60%. For comparison, gross margins were 35.99% and EBITDA margins 5.46% in the immediate 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 gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 93.02, compared to last year’s level of 66.72 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

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

Despite a decline in operating (EBIT) margins as well as a decline in pretax margins, the company’s earnings rose.

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. The company offers designer jewelry, diamonds, gemstones, precious metal jewelry, rings, wedding bands, earrings, bracelets, necklaces, charms, baby jewelry, timepieces and giftware. Birks Group was founded on November 14, 2005 and is headquartered in Montreal, Canada.

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