While JB Hi-Fi had a record half of earnings in 1H23, that is in the rear-vision mirror. The forward trajectory suggests a normalisation of sales and earnings is imminent. We expect negative comp sales in 2H23e and 1H24e for both JB Hi-Fi Australia and The Good Guys. We expect gains from inflation, and The Good Guys improved buying terms.

Endeavour Group reported 1H23 EBIT growth of 16%. The result was characterised by a strong increase in profit margins in Hotels and good cost control in its Retail segment. However, when we look at performance from 1H20 to 1H23, operating cost growth has outstripped revenue growth in both Retail and Hotels. Cost growth will remain a headwind in our view over the next two years. Another unknown for investors is higher capex (or opex) associated with Endeavour’s technology transition over the next four years. We expect very limited earnings growth over the next two years as operating cost growth limits margin expansion.

Metcash’s reported 1H23 sales growth of 8% and EBIT growth of 10%. Price inflation drove more than half the sales growth and will remain a key driver over the next 12 months. There will be some normalisation in Hardware sales, but its mix of business supports margins. The Food business will benefit from stock profits and is holding market share. While 1H23 had weak cash flow, the result will mostly normalise in 2H23e and a higher working capital position is the reality of having more hardware and less tobacco sales.