Bapcor has provided yet another downgrade in a trading update, making it the third downgrade in 12 months. The company’s decision to stick with 2H26e guidance seems brave given the need to invest in price in its core Trade segment. The gearing is likely to rise to 3.3x on our forecasts, above its bank covenants of 3.0x. A capital raising of circa $200 million seems likely to us.

Premier Investments’ AGM trading update gave EBIT guidance for 1H26e of $120 million on a pre AASB-16 basis exclusive of significant items (UK losses for Peter Alexander). Visible Alpha consensus estimates appeared muddied by various factors causing uncertainty around earnings changes. Limited AGM detail provided suggests Peter Alexander continues to perform but sales and gross margins at Smiggle have continued to deteriorate.

Australian retail sales rose 6.2% in October 2025 year-on-year, a surprise given our feedback of modest spending in October in what felt like anticipation of Black Friday deals. The theme of a strong consumer continued from the National Accounts update for the September quarter in which household income was revised higher. Higher house prices and improved savings rates are buffering the consumer with sentiment trending higher.

The 2025 festive season is shaping up as a good one for consumers. They are opening their wallets and buying bargains. The challenge for retailers is the spend is not evenly distributed. Consumers bought more in November and may buy less in December. We have had positive sales feedback for furniture, auto and online and expect these to do well over 1H26e. At the other end of the spectrum, we have had weak sales feedback on footwear and liquor. The challenge for electronics is lapping incredibly good growth from November and December 2024. Using Visible Alpha consensus as the reference point, we see downside risk to sales for JB Hi-Fi, Harvey Norman and Endeavour. Retail has been more promotional and 1H26e risks to gross margin also exist. At EPS, we see downside risk for Accent, JB Hi-Fi, Endeavour Group and Myer. For those wanting a more light-hearted take, further down we have our Christmas gift ideas.

The national accounts for the September 2025 quarter provide an insight to the strength of the Australian consumer. The ABS has revised up historical income growth and in the September quarter household income rose 6.7%, with consumer spending up 5.7%. Income growth has averaged close to 8% so far in 2025. No wonder discretionary retail spending began growing above trend this year. The challenge is identifying sources that will result in any further acceleration in retail spending in 2026. We expect retail spending to continue to trend near current levels. The upside case relies on lower household savings which is possible if house prices rise double-digits, a low probability now given the lack of interest rate cuts any time soon.

Metcash reported a 2% drop in EBIT for 1H26. The company’s sales trends are likely to soften a little from here, particularly as it laps Woolworths DC strikes and the Black Friday boost to Total Tools dissipates. The swing factor for Metcash is its corporate hardware stores that need a meaningful upswing in the residential construction cycle. Profit margins are depressed and should recover. The combination of optionality around hardware upside, contract wins in convenience and a good dividend yield give us reason to be positive.

Temple & Webster reported sales growth for the first 20 weeks of 18%. The update implied a slowdown from the August trading update from 28% to 14% in the interim to the AGM. Growth of 18% was below Visible Alpha consensus expectation for 1H26e at 23% and the share price response reflected the concerns around retaining sales growth at more than 20%. Temple continues to win share and will eventually reach scale to achieve a higher EBITDA margin, where we forecast 12% for FY40e.

Accent Group’s AGM trading update reported like-for-like sales turning negative for the first 20 weeks, a slowing on the +0.8% for the first seven weeks of FY26e. EBIT guidance was provided which was below Visible Alpha consensus for both 1H26e and FY26e. The elevated promotional environment and resulting gross margin impact as well as slower than expected like-for-like sales growth were identified as contributing factors to the earnings impact.

The Australian legal tobacco market has shrunk by close to 70% over six years yet nicotine consumption is up over the same timeframe given illicit tobacco and vapes. While the declines are not over, we can see a path to stabilisation in legal tobacco in the second-half of 2026 as legislation on outlets and stronger border force efforts reduce illicit tobacco and vape supply. For Coles, Woolworths and Metcash, stabilisation in tobacco will add 1% to 2% to food sales growth, while the group EBIT drag of 1%-2% per annum will also fade away from FY27e onwards. For Ampol and Viva, the sales impact is likely to be more meaningful boosting convenience shop sales by as much as 7%. Viva has the largest tobacco exposure at 5% of group EBIT.

Sentiment around Wesfarmers has dropped away in the past month. This is the retail bellwether stock on the ASX and for the first time the share price fall has outstripped the consensus earnings downward revisions. Are perceptions shifting on Wesfarmers? Perhaps. But we still expect retail sales growth of 4% and EBIT growth of 5%.