The Breville Group Ltd (ASX: BRG) share price fell further on Friday to finish the session at $17, down 1.28%.
This equates to a 21% dip over the past four weeks for the kitchen appliances manufacturer.
That's more than twice the fall of the benchmark S&P/ASX 200 Index (ASX: XJO), which has shed almost 10% over the same time frame.
Is the Breville share price a falling knife?
In August 2021, the Breville share price was at an all-time high of $33.61. So now, there's an almost 50% discount going on the shares of this iconic Australian global brand.
But is it a bargain or a falling knife?
Greg Canavan from Fat Tail Investment Research reckons it's the latter. In a recent column on Livewire, Canavan said it's not the right time in the cycle to buy ASX retail shares.
Canavan said:
Well-run retailers are generally excellent businesses to invest in. They generate high returns on equity with minimal debt requirements. They also generate strong cash flows, which enables them to reinvest in growth or pay healthy dividends. And living in a consumerist society with significant asset wealth…no wonder retailers do well.
But over the past 12 months or so, the sector has been under the pump. The Consumer Discretionary index peaked in August last year. It's down nearly 25% since then. Some stocks are down much further over that time frame.
After declines like this, I start to get interested in a sector. After all, these are quality companies. Bought at the right time of the cycle, they have the ability to provide a real boost to your portfolio. But here's the problem: it's not the right time in the cycle for retailers. Not yet, anyway.
Regarding the Breville share price, Canavan said:
Breville is a quality business where the share price has come back into what I would consider an interesting long-term buying range. But momentum is to the downside. Who knows how long it could last? That's why you're better off waiting for the trend to exhaust itself before jumping in.
Or a bargain buy?
As my Fool colleague James reported last month, Macquarie has been bullish on Breville shares. In May, the broker had a share price target of $34.80 for Breville, with an outperform rating.
At the end of the month, the broker downgraded the target to $24.65. It reduced it slightly again last week to $23.80. But the Macquarie team still reckons Breville will outperform.
Dow Jones Newswires summarised Macquarie's recent note:
Breville's decision to build up inventory levels as a buffer against potential supply-chain disruptions doesn't concern Macquarie's analysts, who maintain an outperform rating on the stock.
The analysts say in a note that the small-appliance supplier only pulls forward inventory into the June half from the December half. The timing doesn't raise any concerns about product obsolescence, they add.
They trim the stock's target price by 3.4% to A$23.80, but say that reflects the acquisition of Italian coffee-machine manufacturer Lelit. The stock last traded at A$18.01, down 16% over eight straight losing sessions.
Global expansion
Breville is one of the few truly global Australian companies. It was founded in 1932 but the company reckons it's still got oodles of room left for growth.
Expanding globally is a key component of this long-term goal.
In a recent investor presentation, Breville said it has "a long way to go" with "large, untapped opportunity" that it intends to plug into as soon as possible.
It's continuing its expansion into new countries, including South Korea this month and Poland next month.
In FY22, Breville has also opened in Norway, Finland, Denmark, and Sweden.
Next, they've got their sights set on Germany, Austria, Switzerland, Spain, Portugal, France, Mexico, and Italy.
A key plank in their plans for Italy entails the 100% acquisition of the Italian prosumer specialty coffee group LELIT. Breville is paying 113 million euros for the company.
The deal is expected to be done and dusted on 1 July, according to an update from Breville last week.
What's next for the Breville share price?
Breville recently reaffirmed its previous guidance for FY22.
The company is expecting earnings before interest and tax (EBIT) "to be consistent with the markets' consensus forecast of [approximately] $156 million".
The FY21 EBIT was $136.4 million.
Breville will report its full-year earnings on 23 August.
