Shares in Breville Group Ltd (ASX: BRG) have jumped on a positive trading update, with one broker tipping they have further to run.
The company's managing director Jim Clayton told the Breville annual general meeting (AGM) on Thursday that the company was performing well both in terms of new products and markets, "and, year-to-date, positive trends continue, though the most important months of the half still lie in front of us''.
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Top end consumers holding firm
Mr Clayton said the "premium consumer" was proving reasonable resilient, and the company's plans to avoid undue impacts from US tariffs were also shaping up well.
He said in his AGM address:
I am … pleased to report that our manufacturing diversification project is progressing well. In Phase I, we prioritised speed and quality. We are on track, and as forecasted, we will have US products representing 80% of gross profit dollars manufactured outside of China by the end of the half. In the second half, we will continue to migrate additional products as well as begin Phase II for products already moved, which is increased localisation and cost optimisation.
Breville makes the majority of its money from high-end coffee machines, with a recent research report from Citi, which surveyed coffee drinkers in several markets, predicting strong growth in the sector, in part buoyed by more people working from home.
The company is also investing in new technology, with Mr Clayton telling the AGM that Breville last month released an innovative toaster – the Eye Q – which determines whether toast is cooked properly using a visual sensor instead of relying on time alone.
Shares looking cheap
E&P Capital analyst Oliver Coulon said management's AGM addresses indicated that Breville was travelling well, while noting that the second quarter, which includes Black Friday sales and the Christmas shopping period, were responsible for about 40% of the company's annual sales.
Mr Coulon noted that while some international retailers had reported weak results recently, Breville was exposed to different, premium consumers.
Mr Coulon has a 12 month price target of $41.19 on Breville shares, compared with $31.44 on Thursday morning, up 6.8%.
If his price target is achieved, it would constitute a shareholder return of 31%, before factoring in dividends.
Mr Coulon said the company's share price has, "underperformed meaningfully since its FY25 result''.
He went on to say:
We'd expect a bounce today in the share price on the supportive commentary, and news flow offshore that suggests the Supreme Court may be sceptical about the legality of Trump's retaliatory tariff regime.
Breville was valued at $4.26 billion at the close of trade on Wednesday.
