Wesfarmers reported FY23 group EBIT of $3,863 million, growth of 6%. The result showed some signs of slowdown in the second half where retail EBIT only rose 2%. We expect sales to slow from here given recent trends and weakness in discretionary income for consumers. The company will cut costs and the margin pressure should be modest, but it will still be challenging to grow retail earnings in FY24e. The WesCEF business could see a drop in EBIT of 17% on our estimates. The core business will suffer a larger drop, but lithium earnings will start from 2H24e onwards.

Domino’s FY23 EBIT of $202 million is likely a trough given the company’s cost saving program. While pleasing, the lingering concern we have is focused on is weak franchisee profitability, which will limit new store openings. Moreover, Domino’s balance sheet may avoid any major capital raising, but it is also constraining support for franchisees when compared with offshore peers.

Woolworths reported FY23 sales up 6% and EBIT up 16% and the result  was characterised by a return to more normal trading patterns. EBIT was up 3% excluding the impact of an unwind of COVID-19 costs in the prior year. The Woolworths Food division had a strong improvement in margins, which bodes well for FY24e and its investments in adjacencies is supporting higher margins than major peer Coles. We expect elevated capex to continue over the next two years given supply chain investments, which should deliver a return.

Coles reported underlying EBIT down 5% for 2H23 in its Supermarket division. The drop in profit margins was a function of both gross margin pressure from rising theft and higher operating cost growth. Unfortunately for the company, these trends will persist into FY24e leading to a drop in EBIT margins. FY24e should be a trough in earnings. However, margin expansion is largely contingent on its capex projects delivering a return and it may take 2-3 years to prove success on this front.

Premier Investments has provided a trading update that reveals that 2H23 sales rose 1.3% and Retail EBIT fell 2.2%. In light of a weaker backdrop it is a good result. The company has also announced a strategic review that could result in separation of Peter Alexander and Smiggle and release value in its franking credit balance.

Australian supermarket sales are at a record low as a share of total food spending. Dining out is winning share of spend and the same is true for the US and NZ. Our research shows that employment growth, inbound tourism and savings tend to be well correlated with dining out spending and all still point to solid growth. Supermarket prices have also risen faster impacting its relative affordability. Dining out is bound to slow, more so in 2024 than now and unfortunately for supermarkets any uptick in volume may be more than offset by a fade in inflation.

Super Retail Group reported FY23 EBIT growth of 10%. For the second-half EBIT dropped by 4%. Sales trends have held up well so far and the company has reduced its inventory. However, conditions are likely to be more challenging over the next year. As a result, profit margins will fall. The company will also have rising overheads and costs associated with its loyalty program in FY24e.

Inghams reported FY23 EBITDA growth of 36% on a pre AASB-16 basis. For the second-half, the EBITDA margin improved 260bp. Strong sales growth is price-driven and will support FY24e earnings. Production issues from FY22 are now resolved and volume growth should resume. Inghams is at the start of a multi-year recovery in EBITDA margins and it should achieve double-digit earnings growth.

Treasury Wines reported FY23 EBITS up 11%. The second-half rose by 6%. While the profit result was decent, the sales performance was poor, particularly in the Americas. Margin targets have largely been met and the company needs to kick start revenue growth from here. We expect revenue to rebound in 2H24e. The lower Australian dollar will represent a meaningful contribution to the achievement of “high single-digit” EBITS growth in FY24e.  The key share price driver remains an unwind of tariffs in China, which may happen within the next six months.

Endeavour Group reported FY23 sales up 2% and EBIT up 11%. The debate is whether the company can cut costs sufficiently to ensure profit margins do not fall in FY24e. The company faces cost growth of 7% on our estimates and sales growth is more likely to be 4%. While a combination of gross margin gains in its Retail division and some cost savings should help, we expect modest margin compression. Another headwind in FY24e will be higher net interest costs.