Breville Group Ltd cooks up mixed half year: Should you buy?

Breville Group Ltd (ASX:BRG) had a poor half, but has forecast better times ahead.

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Kitchen appliance business Breville Group Ltd (ASX: BRG) this week posted a net profit of $29.7 million on revenue of $293.9 million for the six-month period ending December 31, 2014. The profit and revenue are down 4.9% and 5.9% respectively compared to the prior corresponding period.

A fully franked interim dividend of 14 cents per share was paid on earnings per share (eps) of 22.8 cents, compared to eps of 24 cents in the pcp.

The headline numbers seem bad in part because they are and in other part because the pcp was record breaking, but nonetheless the declining earnings in core markets like North America are a thorn in the group's side.

North American problems

The business blamed the 10.8% drop in US sales on declining juicer sales, with the acting chief executive stating that he expects the US business to return to growth now that juicer sales have been "reset".

The local Australia and New Zealand business also delivered flat revenue and earnings amidst an environment of soft discretionary consumer spending. A flat result is no disaster, given the local macro environment and strong pcp, although shareholders will want to see a return to growth in the second half.

The international segment was again supported by strong sales in the UK, although these were not enough to offset weakness elsewhere as overall revenue and earnings were moderately down on the pcp.

Breville isn't the only retailer to have struggled recently as others like Myer Holdings Ltd (ASX: MYR) and Kathmandu Holdings Ltd (ASX: KMD) also suffered from competitive pressures and soft consumer confidence.

Outlook

Despite the disappointing numbers Breville stock has climbed around 8% to $7.55 since the announcement as investors take heart from a forecast for a return to mid to high single digit earnings growth in the second half.

Forecasts are all well and good, but Breville will need to deliver or else it will appear as though the business is facing something more serious than short-term, cyclical-based headwinds.

As has been demonstrated in North America, Breville carries competitive risks and needs to stay on top of its game in product development. Overall, it looks one of the better retailers on the ASX with global exposure and the opportunity to service an area that is likely to see sustainable demand if it can get its product development right.

Motley Fool contributor Tom Richardson owns shares in Breville and Kathmandu. You can find him on Twitter @tommyr345

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