Coles reported 1H25 EBIT up 5% with a stronger lift in its Supermarkets division of 7%. The company had solid sales trends, which partly reflected a benefit from Woolworths DC strikes. Underlying sales and EBIT growth in the Supermarket business is closer to 3%-4%. Cost savings and DC efficiencies are offsetting natural cost inflation, not boosting margins. Over the next 18 months, Coles will benefit from the unwind of transition costs that will lead to double-digit EPS growth.

Woolworths reported sales up 4%, but EBIT down 14% in 1H25. We expect the company will have a challenging 2H25e as well. Management is starting to address its challenges. CEO, Amanda Bardwell, said that the company will assess the shape of its business portfolio. Each business unit must have reasonable prospects on a 3-5 year view. Overhead costs are being cut and there is a tougher stance on the low returning Big W and NZ divisions.

Inghams reported 1H25 poultry volumes down 2.7% and EBITDA dropped 10%. Price realisation was good and Inghams had feed cost reductions and admin cost savings to partly offset the volume decline. Prices are 19% higher than three years ago. This is important as it signals that new contract wins to replace lost volume with Woolworths has not been done at irrational prices.

Accent Group reported 1H25 EBIT of $81 million, up 11%. The gross margin deterioration of 100bp owing to promotional intensity lead us to lower full year expectations. The nearing maturity in the store opportunities for Platypus and Skechers see us lowering our long term store forecasts by 4.5%. We incorporate an upside case in our valuation for a deal with Frasers Group.

Super Retail Group reported 1H25 sales up 4%, but EBIT down 7%. The typically resilient Supercheap Auto division had a 6% decline in EBIT. The increasingly competitive sales backdrop for Auto makes it challenging to see much earnings recovery over the next 18 months. Elevated competition will continue to be a headwind in Supercheap Auto and we expect flat like-for-like sales for 2H25e and FY26e. Elsewhere, sales trends are improving and mid single-digit sales growth is likely for Rebel, BCF and Macpac in 2H25e.

Wesfarmers reported 1H25 EBIT growth of 5%. It was a solid sales and margin result in Kmart and WesCEF. Bunnings showed better sales trends, although underlying margins dropped slightly. The swing factor for Wesfarmers earnings growth over the next few years remains lithium and the path to profitability is most likely another 18 months away. Investors will need patience as well as optimism that lithium prices can rise from current depressed levels.

Treasury Wines reported 1H25 EBITS of $391 million, growth of 35%.  Penfolds price realisation and performance relative to 1H20 are positive signs for future EBITS growth. The Americas is more challenged, but the segment’s earnings growth is likely to be largely driven by the DAOU brand over the next two years. Treasury’s decision not to divest its commercial brands may be financially logical but does raise the question about the potential to realise value in Penfolds if the valuation remains depressed.

Breville reported 1H25 sales growth of 10% and EBIT growth of 11%. The result was characterised by strong sales across all geographies and particularly in coffee machines. We expect the company to sustain good sales growth, helped by a step-up in product development, marketing and the addition of new markets including China. 

JB Hi-Fi reported 1H25 sales growth of 10% and EBIT growth of 9%. Impressive top line growth was hampered by a decline in gross margins and elevated operating cost growth. While good sales trends should continue, the results provide a reminder that gross margin declines are a risk and operating leverage is low. The company’s large cash position does bode well for further special dividends. While dividends and cash flow are attractive to some investors, the valuation remains steep in our view. 

Nick Scali delivered a better than expected earnings result and the gross margin recovery since the AGM guidance was a standout. We see 2H gross margin holding flat on last year for ANZ, with group gross margins at 62.3% for FY25e. Initial signs of UK improvement and hints of greenfield expansion has seen confidence grow in the UK rollout. There is, however, now little room for error in execution.