City Chic’s 1H24 EBITDA was at the top end of the guidance range given in late January 2024.  While losses are starting to reduce and gross margins improve, the sales base is much smaller. We expect sales to stabilise around May 2024 and anticipate noticeable gross margin improvements. City Chic also outlined a range of cost saving measures to restore profitability that will show through in 2H24e.

Coles 1H24 results revealed a tight control on costs in its Supermarkets division and some easing of the headwind in stock loss. The retailer has started 2H24e strongly in its Supermarket business. While some of the momentum is likely to ease off, Coles should achieve market share gains in 2H24e. We also see further improvement in stock loss driving underlying EBIT higher in 2H24e.

Endeavour Group reported 1H24 sales up 2.5% and EBIT up 2.6%.  The company had an increase in gross profit margins and some cost savings to help offset higher operating cost growth. Weak sales trends in liquor are likely to persist throughout 2024 in our view as the industry resets volumes back towards more normal levels post the COVID-19 boom. While higher gross margins can be a red flag, Endeavour is holding market share and the cost savings embedded in 1H24 give us confidence in second half earnings.

Accent Group reported EBIT down 21%, but down 11% when adjusting for the extra week of trading in 1H23. Strong store rollout will drive an uplift in sales, recent gross margin improvements hold but costs growth remains elevated. The challenge for Accent Group is achieving positive comp sales while holding gross margin improvement to mitigate cost inflation, especially prevalent in wages and rents. Strong cash conversion and landlord contributions assisting new store rollout means a healthy dividend payout ratio can be retained.

Bapcor reported 1H24 sales up 2% and EBITDA down 2%, with net profit down 12% given higher interest costs. The company’s sales decline in its Retail division is likely to ease in 2H24e. However, interest costs will remain a headwind to profits again this half. The fundamental debate remains the outlook for Bapcor’s cost savings program (Better Than Before). With a change of CEO, the company has acknowledged the phasing may shift. We expect an additional year delay in the timing of cost savings.

Super Retail Group reported EBIT down 3% in 1H24 with cost growth ahead of sales growth. Super Retail Group’s trading update was soft, but its sales trends are unlikely to deteriorate from here. The challenge is operating cost growth of 6.5% is the base case for 2H24e with sales growth of only 1.2%. Wage and rent cost growth will remain elevated.

Domino’s 1H24 result revealed mixed information. Same store sales growth momentum has improved early in 2H24e and is an encouraging sign. However, the underlying cost growth for the business looks elevated and franchisee profitability is well below levels that will reignite store openings. While earnings may have troughed, we expect an acceleration in store growth is two years away given such low franchisee profitability.

Woolworths 1H24 EBIT growth of 3% revealed a stark contrast amongst its divisions, with Australian Food EBIT up 10%, but NZ earnings down 41% and Big W down 60%. The challenge for the company is that its Australian Food sales are slowing rapidly. We also expect the outsized contribution from eCommerce and Digital & Data to moderate. The concern is lower food inflation crimping Food segment margins and a lower profit margin for Big W. With a change of CEO and weaker food inflation outlook, we expect the earnings outlook on the company to be moderated.

Inghams reported 1H24 sales up 9%, gross profit up 32% and EBITDA (pre AASB-16) up 66%. The impressive result needs to be put in context given weak margins in the prior year. We expect EBITDA growth of 16% in 2H24e, with a slightly higher than usual skew of earnings to first-half as volume growth slows. We expect a smaller 6% increase in EBITDA for FY25e, largely driven by lower feed costs. Inghams good growth in FY24e EBITDA will be partly dented at EPS by a higher effective tax rate at 29%, previously 23%.  

Treasury Wines reported earnings down 6% in 1H24. While a weak result, conditions are likely to be much stronger next half. We expect organic EBITS growth of 9% in FY24e and 5% in FY25e. The upside from China tariff removal and contribution from DAOU are the key catalysts for the business. If wine tariffs in China are removed in late March, there could be a 4%-10% EBITS uplift as the company as the company sells more mid-tier Penfolds volumes and there is a global re-pricing of the Bin range to 2H24.