A2 Milk’s downgrade to guidance will hurt FY26e EBITDA but the impact in FY27e should moderate. We lower our FY26e EBITDA by 12% and FY27e by 6%. For FY28e, our downgrade is only 3%. The downgrade is mostly a function of lower shipments of infant formula given reduced supply from its manufacturer and longer approvals for customs clearance. Higher air freight costs account for close to one-third of the downgrade. We move from Underweight to Hold on A2 Milk and see the potential for a special dividend at the full-year result to support the stock. Our revised target price is $7.60 (previously $8.30).

Now that reporting season is over for Australian retail, we have finalised the themes and issues observed during 1H26. This is important context as there are now quite a few body blows facing the consumer – higher interest rates and higher petrol prices clearly add risk to the retail outlook. The impacts are likely to be more significant in the 1H27e fiscal period and more painful in housing-related retail categories and takeaway food.

Australian retail sales rose 4.8% year-on-year in February 2026. Growth has softened a little, reflecting soft growth in food & liquor and a slowdown in household goods. Growth in dining out and online retail remain above trend, suggesting consumers took the February rate hike in their stride. The starting point for the slowdown in retail sales is reasonably strong and we may see March growth at 3%-4% overall following higher petrol prices. A return to sales growth near 4% is our view and more consistent with a neutral cash rate backdrop.

Over the long-term, JB Hi-Fi Australia has delivered close to 5% comparable sales growth. The company’s ability to alter its product range as well as drive more premium products has been a hallmark of its success. The company now faces a tougher demand backdrop given price inflation in some key categories combined with deflation in others from a higher Australian dollar. What does it all mean? Volumes for electronics will slow given the retail cycle is slowing as well as the consumer response to higher prices. Even so, the company should deliver sales growth. We see comp sales troughing at 2.7% in FY27e with a return towards 3% beyond FY27e.

The debate about the minimum wage decision for FY27e is heating up and the backdrop of rising inflation is adding risk for retailers. We expect a retail award wage increase of 3.8% to 4.3% for FY27e, with a backdrop of the trimmed mean inflation at 3.7%-3.8%. The retailers with highest sensitivity to wage cost growth are Myer, Woolworths, Bapcor and Accent Group. All retailers have adapted to higher wage rate growth over the past three years by automating elements of their business and cutting hours. Further wage savings is likely to be limited to those retailers with larger formats and flexible labour, which includes Bunnings, JB Hi-Fi and Officeworks.

Myer Holdings reported 1H26 group EBIT of $113 million, down 17% on a proforma basis. Sales growth of 2.1% was offset by lower gross margins and cost investments. We have revised our sales lower on store count and slowing comps. We lower gross margin expectations and delay synergy and supply chain benefits. Fixing the supply chain issues, delivering on synergies and leveraging Myer One should all translate into meaningful earnings growth delivered from a strong financial position.

The Federal Government has lifted the Fuel Security Services Payment (FSSP) thresholds that will result in far lower risk of EBITDA losses in both Ampol and Viva’s refining businesses. We estimate the EBITDA loss scenarios would only occur at a refining margin close to LRM of US$4.50/bbl or lower Ampol or GRM of US$6/bbl for Viva. Current elevated refining margins mean the FSSP is not at all relevant for the March quarter. The real debate is how long elevated refining margins hold. The situation around oil and fuel supply remains highly uncertain and should be taken into consideration in gauging the 12-24 month outlook.

Premier Investments reported 1H26 Retail EBIT (pre AASB-16 and excluding significant items) of $119 million, down 7.8%. Total sales were flat with gross margin of 66.9%, which fell 92bp. With Peter Alexander sales per store slowing and the UK in trial phase, a Smiggle turnaround will drive the earnings growth.

Given the increased uncertainty for consumers, we have put together a slide deck to help navigate the potential risks to retail demand over the next 12 months. Separately we have published reports about both the risk from higher petrol prices and what history tells us about the impact of interest rate hikes on retail spending.

SPC Global reiterated guidance of full year normalised EBITDA growth of 25%. SPC Global 1H26 EBITDA of $13 million implies 2H25e EBITDA of $25 million with full year FY26e EBITDA of $38 million. We forecast that the EBITDA improvement in 1H26 benefitted from the delivery of synergies and the exit of low margin contracts offset missed international sales impacted by timing differences.