Sales grew 5% in 1H26 (MSTe +3.8%) and 17.8% in the first six weeks of 2H26e. Gross margins at 65.2% were +3bp in 1H26 (MSTe 63.1%), and management guided to flat gross margins on pcp for 2H26e. Given the early success of the “AfterGlow” store format, management plan to accelerate the new store concept rollout with “mini refurbs”.

Nick Scali delivered 1H26 EBIT of $68.5 million, up 25%. NPAT of $41 million was ahead of both guidance and Visible Alpha consensus. The group gross margin increase of 318bp, surprised to the upside and resulted in 65.4% for the half. Nick Scali’s ANZ trading update for January like-for-like written sales orders at 3.1% highlighted a deterioration in momentum. We have lowered our sales forecasts but lifted gross margin expectations.

Breville reported strong constant currency sales growth of 9% in 1H26, but tariff headwinds resulted in an almost flat EBIT result. Sales momentum may soften a little as the retailer sell-in eases and price inflation drops over 2026. We expect the company to maintain a tight control on costs in 2H26e to meet EBIT guidance of “slight” growth. The continued growth of the coffee category, new product launches and new markets support ongoing EBIT growth near 10%, noting the company does face a headwind from a stronger Australian dollar in FY27e.

Temple & Webster reported 1H26 EBITDA of $13.5 million, up 2.2%. The EBITDA margin of 3.6% for 1H26 was within the guidance range of 3-5%, but on the low end, as promotional activity was used to drive a sales outcome. We lift our sales forecasts but lower our delivered margin to reflect a more promotional environment. The Temple & Webster model continues to deliver market share gains and over time scale will drive margin improvement.

Australian retail sales rose 4.7% year-on-year for December 2025. This was a solid end to the year and the December quarter showed growth of 5.8%, which was above trend. It is important to call out the strength of non-food, which was 7.1% across the December quarter, an unusually strong result. We believe we have just seen the peak in retail sales growth, with a gradual slowdown over 2026 likely.

Peter Alexander is a high margin, cash generative business. However, we anticipate a sales deterioration and gross margin drop at Smiggle in FY26e, and think Smiggle will be breakeven, contributing little to our FY26e Premier Investments EBIT forecast. We have lowered our Smiggle store network forecasts, lifted operating costs but also raised gross margin expectation on favourable currency moves.

Super Retail Group has earnings upside in Rebel and from its new Victorian distribution centre. The addition of a currency tailwind for cost of goods in FY27e supports solid EPS growth. We estimate a 10% lift in the Australian dollar could be a $30 million, or 8% EBIT benefit. It is a 71bp boost to gross margins. While there is some uncertainty given changeover of CEO and a new three-year strategy plan coming, we expect the plan to have few surprises.

Viva reported a lift in group fuel volumes, better gross margins in its convenience stores and higher refining margin in 4Q25. While all these signs are encouraging, the refining margin increase was smaller than Ampol’s given maintenance and power outages. Moreover, the improvement in convenience gross margin was made on a lower sales base. Viva’s cost savings seem to be flowing through but the company will need to show a more meaningful lift in sales from the OTR conversions in order to see any re-rating.

The link provides a presentation associated with a webinar we held. The webinar addressed our retail sales forecasts for 2026. We addressed the outlook for the Australian retail sector in 2026 and beyond. The sector had a strong finish to 2025 but the outlook is more hazy with risks to both sales momentum and gross margins emerging. 

Australian inflation accelerated for the December 2025 quarter. Even the trimmed mean popped to 3.4%, above the RBA’s target of 3.2%. Financial markets are pricing in a strong chance of a rate hike in February 2026. We are less convinced. While broader inflation has increased, retail price inflation is largely steady at 2.1%. Liquor inflation stepped down. Electronics, hardware, furniture and sporting goods prices were in decline. The outlook for retail inflation is lower over the next 12 months given a higher Australian dollar and lower input costs.