A2 Milk’s recent update suggests that its product shortages in China have been resolved. The financial pain was a -$53 million hit to FY26e sales and -$33 million hit to EBITDA. Given A2 Milk’s disclosure, it appears the loss on China label sales was over $100 million, with half of the customers lost to competitors and half switching to A2 Milk English label. Re-capturing lost customers will take time and keeps us cautious on any sales recovery. On margins we are more optimistic about FY27e as Pokeno losses unwind and the supply chain has more inventory buffers.

Coles confirmed it is assessing the merits of an acquisition of Greencross, the parent company of Petbarn and Greencross Vets, owned by TPG and super funds. The press speculation of a $4 billion acquisition price is full. Coles could debt fund such an acquisition. It will be EPS accretive, but the real question is whether it is value accretive. We worry about the future growth of the pet industry given its COVID-19 boom. The market is also potentially saturated with stores and migrating online. Any acquisition price above $4 billion would concern us.

Our research shows that housing churn is the strongest driver of household goods sales across Australia, the UK and NZ. Housing churn, which represents the loans on owner occupier homes and refinancing, is driven by changes to interest rates with a three month lag. Given different interest rate cycles, we forecast housing churn to drop 10% in Australia, but better outcomes in the UK and NZ in FY27e. There is a strong chance that furniture sales decline by 4% in Australia creating earnings risk for Harvey Norman, Nick Scali and Temple & Webster. JB Hi-Fi will see a slowdown in electronics categories too.

The link provides a presentation associated with a webinar we held. The recording is embedded in the presentation and details our revised forecasts for retail in the year head. Woolworths is undertaking a program called Customer Offer Reset (COR), which will reduce its branded range and shift more products to an every day low pricing (EDLP) proposition called Lower Shelf Price (LSP). The program will show up on shelf shortly and impact the next two years. COR and LSP should be positive for sales and earnings, but it does depend on the competitor response.

Australian retail sales rose 5.7% in May 2026 year-on-year. The three-month rolling growth was 5.4% and for non-food retail it was 6.9%. These figures are all above long-term average growth of 4.9% for total retail and 4.4% for non-food retail. Given the persistence of strong growth, some may feel a downturn is unlikely. We expect the downturn in sales growth to be gradual and more evident late 2026 and early 2027 as income growth slows. Additional risks are building if house prices fall.

Woolworths is undertaking a program called Customer Offer Reset (COR), which will reduce its branded range and shift more products to an every day low pricing (EDLP) proposition called Lower Shelf Price (LSP). The program will show up on shelf shortly and impact the next two years. COR and LSP should be positive for sales and earnings, but it does depend on the competitor response. These programs demonstrate a sharper focus by Woolworths on execution and price trust. While not solely related to COR and LSP, we expect Woolworths to sustain above market (and Coles) growth over the next year and EBIT margin expansion.

Metcash’s FY26 EBIT of $504 million, declined by 1%. Additional detail about its trading conditions early FY27e look promising. However, the company will have a number of hurdles that result in only 1% EBIT growth for FY27e on our estimates. The improvement in sales trends for Metcash will come from tobacco, which is low margin. Recent investments in retail stores and IT systems will lift depreciation and interest costs.

Frasers Group has announced a full takeover offer for Accent Group with no premium at A$0.65. Frasers Group has used the strategy in the past, building up a stake and launching an opportunistic bid with varying success. The offer represents a 3.3x EV/EBITDA multiple (FY26e). Frasers may lift the bid but has exercised patience in the past. The board will say that the offer undervalues the company, holding out for an improved offer in our view. We weight three scenarios at an equal chance of occurring: a full takeover going ahead at a premium to the current offer, a status quo scenario and a Sports Direct agreement termination.

Ampol’s EG acquisition has been approved by the ACCC on condition of divesting 41 sites. Even with this, the EG deal is compelling. The EG stores enable a faster rollout of U-GO sites and cost savings in buying and overheads. We see value creation from this deal with further synergy upside. Ampol is positioned for a very strong year of earnings given higher refining margins in FY26e. However, the more enduring upside will come from the EG acquisition.

Wesfarmers 2026 strategy day had familiar messages about driving growth and productivity. What we found new was the emphasis about online marketplace growth, higher returns in Health and the confidence about its lithium expansion plan. We are cautious about slowing sales in Bunnings over the next 12 months.