Breville is a premium kitchen appliances business with a presence in Australia, Europe and the Americas.It was founded in 1932 – founded from capital obtained from a successful 4-to-1 bet at the 1932 Melbourne Cup.
Breville sells nearly $1.5bn in goods each year in over 100 countries globally and caters to middle to higher income earners. It is headquartered in Sydney, has manufacturing facilities in China and regional offices in key markets.
Breville listed in 1999 and has achieved growth of over 2000% since. In the last 10 years, it has gained 200%.In FY23, it generated $1.48bn in revenue (up 4%), $172m in EBIT (up 10%) and a $110.2m NPAT (up 4.2%). It recorded a 35% gross margin. The 4% revenue growth is hardly earth shattering, but follows 3 years of revenue growth of 19-25%. In 1HY24, it achieved $906m in revenue (up 2%), $131m in EBIT (up 8.2%) and a $84m NPAT (up 6.7%).
The company was impacted in the past two years due to fears that inflation would impact consumer demand and the company's costs, not to mention the company's inventory uplift. Neither of the former two came to pass, while the latter issue has been resolved.
We think there are four reasons why Breville can grow. First, it’s track record of sales growth with 14.6% CAGR in EBIT over the last seven years. While this isn’t a guarantee it can achieve the same results, it does inspire confidence. Second, the company’s experience in successfully entering new markets. The company estimates 70% of its revenue potential is unaddressed and it could ultimately achieve $9.7bn in revenue.
The third reason is the market the company is in. Breville offers premium and functional goods, targeted at consumers with higher disposable income. It is therefore less likely to be hit by a slowdown in consumer spending, at least to the extent of companies targeting lower incomes.Consumers feeling the pinch might view upfront investments in Breville’s products – coffee machines, ovens and juicers – as saving money in the long run. And consumers already with appliances and needing new ones won’t put off purchasing a new one for too long. Fourth, we observe that Breville has not had the same supply chain issues other companies have had. Unlike Kogan (ASX:KGN), Breville did not over-invest in new inventories predicting the boom would go on indefinitely.
