Bapcor reported FY24 sales of $2.03 billion up 1% and EBITDA of $269 million down 10%. Net profit fell by 24% pre significant items on higher interest costs. The company reported a small improvement in sales early in FY25e. However, the drop in 2H24 profit margins is likely to result in only modest EBITDA growth for FY25e even though the company has cost savings to flow through. During the second-half all Bapcor’s divisions had negative same store sales performance with Trade down by 1.5%, Retail down 1.0% and New Zealand lower by 0.5%.

Metcash’s investor day made it clear that it is looking to accelerate growth. This growth will increasingly come from store openings and Metcash will need to spend more capex to facilitate the growth. The company is in a stronger position to grow given the profitability across the network and capability of management.

Inghams reported 1H23 sales up 9% and EBITDA down 16%. The contrast between sales and earnings reflects higher prices, more than offset by higher costs. The magnitude of the price rises is significant and will be an even greater contribution to sales in 2H23e on our estimates.

Metcash’s strategy day outlined more initiatives to drive sales growth and higher capex. The strategy is logical given its market position and more profitable retailers. In our view, revenue growth will be structurally better than historically. In food, the market is more rational both for store growth and pricing, which will mean much better growth than 2010-2019. In Hardware and Liquor, as a clear number two, the company has opportunities to drive new stores and refurbishments. While growth is stronger, capex will be over $200 million a year and in part a necessary investment in supply chain and IT to enable growth.

Metcash will host an investor day on 17 and 18 October 2022. This is the first opportunity for new CEO Doug Jones to set his agenda for the company. We expect the focus to be about initiatives that drive sales, more so than margins. Updating the company’s IT and distribution centres is likely to be a near-term focus. We will look for information about initiatives to drive more store refurbishments as well. We are interested in longer-term challenges such as developing a better value offer and private labels; considering expansion into food service or pharmacy and how the business will compete online. The strategy may not move numbers much, other than higher capex in our view.

While Premier Investments reported flat FY22 EBIT, it was a strong 2H22 with EBIT up 23%. The company had very strong second-half sales growth and gross margins expanded. We expect strong sales to persist in 1H23e, but then we are cautious about calendar 2023. Sales growth may turn negative in 2H23e and FY24e on our forecasts even with good growth plans for Peter Alexander. Moreover, wages and rents are likely to be a source of margin compression.

Super Retail Group’s trading update shows largely consistent sales trends over the past 10 weeks, with LFL sales up 3.4%. Supercheap Auto remains the standout segment. Gross margins are steady and the company is more optimistic about store openings. Super Retail’s PE ratio has derated on concerns about its inventory position. We think those concerns are misplaced given the challenges in securing inventory that will continue throughout 2022.

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.

We initiate coverage of Super Retail Group. The company may have a challenging six months over the remainder of 2021 given lockdowns and a very high base from 2020. Fundamentally, the company has lifted its online penetration, increased its loyalty cardholder base and reduced discounting. These changes all support higher EBIT margins medium term. Moreover, the balance sheet is net cash.