Costa reported 1H22 EBITDA of $141 million in line with guidance given in July. While there was earnings growth, profit margins did fall and we expect lower margins in 2H22e. Pricing in mushrooms and berries has been strong, but the lower quality citrus harvest for 2022 will lower prices realised this year. We forecast EBITDA of $241 million for FY22e. The company has said that the outcome for citrus is unknown and we see an EBITDA range anywhere between $220 and $245 million as plausible.

Premier Investments 1H22 result was well flagged. The more interesting perspectives are that its gross margin remains high and rents are resetting as a lower share of sales. Sales trends so far in 2H22e are solid, which should provide EBIT growth in the half. The major share price driver for Premier from here is likely to be the ways it utilises its net cash position.

Harvey Norman delivered a solid 1H22 result with sales down 6% and profit before tax down 21%, excluding property revaluations. Earnings improved in the final two months of the half as lockdowns eased. The company has good control on costs and inventory levels are lean, but not short. We forecast FY22e PBT down 15%, which implies a smaller 2H22e earnings decline.

Domino’s reported a 6% drop in EBIT despite 11% sales growth in 1H22. The company saw a decline in SSSg for Japan and some disruptions in Australia/NZ. Domino’s noted that Japan sales are rebasing lower, which will lead to lower sales growth through to September 2022 in our view. Our key observation from 1H22 result was cost growth running ahead of sales growth. Such growth was outsized and if it continues will dampen margins across FY22e.

Woolworths reported sales up 8% but EBIT down 11% in 1H22. Even though COVID-19 disruptions added costs, underlying cost growth was also elevated, which we attribute to higher online sales. The company noted that food inflation had accelerated 2%-3% in early 2022, which is a good sign for earnings. We expect Woolworths to proactively work on lowering costs over the next two years.

Coles reported 1H22 EBIT down 4% to $975 million. The company has managed costs well and stabilised market share in Supermarkets, while growing share in Liquor.  We expect sales and earnings to improve in 2H22e, driven by higher food inflation. We estimate an acceleration of 150bp in packaged grocery inflation. Note there will still be a headwind to earnings in Liquor from rising costs and in Express as tobacco sales fall.

Endeavour Group reported 1H22 EBIT of $556 million, up 3%. The result was driven by gross margin gains in the Retail business. The company also did a good job in managing costs given the disruptions from COVID-19 during 1H22. We expect most of the gross margin gains seen in recent years to be retained, particularly given the growth of Pinnacle Drinks. However, we are cautious about the performance in FY23e. Overall, we forecast FY23e EBIT growth of 4%, which comprises a 9% fall for Retail and 37% EBIT growth in Hotels.

Inghams reported EBITDA of $222 million for 1H22. This was a decent result with flat margins despite headwinds from lockdowns adversely impacting the channel in the half. Unfortunately, COVID-19 disruptions will be more impactful on earnings in 2H22e. We estimate 2H22e EBITDA of $171 million down 26%. The impact from staff absenteeism, an adverse sales mix and oversupplied wholesale market all make for a difficult half. However, the issues should be transitory and if COVID cases continue to fall, earnings should improve from April 2022 onwards. We expect a recovery in FY23e.

Wesfarmers reported a 12% fall in 1H22 EBIT. While the company flagged a drop in group earnings, the fall in Bunnings earnings and higher cost growth raises concerns. We expect earnings to fall in 2H22e as well. The bigger picture is Wesfarmers is lapping very strong earnings across its retail businesses from FY21. We are not concerned about price inflation creating a headwind because Wesfarmers operates in rational markets. However, higher operating costs are likely, including additional investment in digital capabilities as the company competes for a more viable position online.

Treasury Wines reported an EBITS decline of 7% for 1H22. This fall in earnings was largely expected given brand divestments and the loss of earnings in China. The good news for the company is that it should see earnings growth from here. Higher margin channels should recover, grape prices are likely to fall and the acquisition of Frank Family Vineyards will contribute to earnings. The report includes a discussion about the company’s margin targets, inventory position and cost of grapes.