Lovisa’s AGM trading update revealed weakening sales trends and a slower pace of net new store openings. We expect to see a year of slower store openings, influenced by the CEO transition period being so drawn out. Increasing competition and promotional activity weighs on margins.

Domino’s recently announced that Don Meij, CEO of the company for the past 22 years, will retire. The Board announced the appointment of Mark van Dyck, as CEO. He is an executive with experience at Compass Group and within the Coca-Cola system. Mr van Dyck presented a sensible approach to improving profit margins, but it will take time as improving franchisee profitability is a first-order priority in our view. 

Endeavour’s share price has dropped 10% in the past quarter. Our take is the share market is concerned about the outlook for liquor industry demand and the transition to a new CEO. We address the liquor industry outlook in this report and find that the weakness in sales is more a function of the COVID-19 spike in demand than a structural concern. We expect retail liquor sales to improve meaningfully by June 2025 and support better earnings for Endeavour. 

Bapcor provided a trading update with detail on the sales growth for the nine months to 31 March 2024 and guided to FY24e proforma NPAT of $93-97 million. Sales trends for the nine months were mostly lower than the 1H24 sales trends. The fundamental debate remains the outlook for the cost saving program (Better Than Before). Management instability makes it difficult to see the cost savings being delivered anytime soon and the net benefits may be far smaller than the gross $100 million savings.

Woolworths 1H24 EBIT growth of 3% revealed a stark contrast amongst its divisions, with Australian Food EBIT up 10%, but NZ earnings down 41% and Big W down 60%. The challenge for the company is that its Australian Food sales are slowing rapidly. We also expect the outsized contribution from eCommerce and Digital & Data to moderate. The concern is lower food inflation crimping Food segment margins and a lower profit margin for Big W. With a change of CEO and weaker food inflation outlook, we expect the earnings outlook on the company to be moderated.