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Metcash (MTS) - Rational acquisition & trading update

Our take on Superior Foods and hardware acquisitions

08 February 2024

Metcash’s acquisition of Superior Foods and two mid-sized hardware businesses is sensible and, in our view, best described as fairly priced. The upside in value for Metcash shareholders will come from realisation of synergies by FY26e, with potential value creation as Metcash builds scale in the foodservice and frame & truss sectors.

Domino's (DMP) - Trading Update

Trading update reveals weakness

29 January 2024

Domino’s has delivered a post-market trading update highlighting very weak sales in Asia and slowing sales in Europe for 1H24e. The tone of the update also suggests progress, but not enough, on franchisee profitability. We expect it will take longer for store rollout to improve and as a result remain negative on valuation grounds.

Accent Group (AX1) Initiation

Regional expansion runway

18 January 2024

We initiate coverage of footwear and apparel retailer Accent Group. The company has store rollout potential to grow by 240 stores in four years, or a 6.6% CAGR. Moreover, the evolving product mix contributes to higher gross margins as more vertically sourced product and more higher margin apparel goods are sold. However, the company is facing rising cost of doing business coupled with a period of slowing same store sales which puts pressure on margins in FY24e. The store network growth potential and gross margin gains will help lift margins in FY25e and more so in FY26e.

Super Retail (SUL) Trading update for January 2024

Gross margin cushion

17 January 2024

Super Retail Group provided a trading update highlighting that sales held up relatively well in 1H24 and gross margins were up slightly. Like many retailers, gross margins are proving to be a cushion to the weakness in sales and elevated cost growth. We lift our EPS forecasts by 7% in FY24e and 3% in FY25e. While a positive update, we expect sales trends to be soft from here and cost growth will outstrip sales growth for two consecutive years.

Bapcor Ltd (BAP) - sales outlook

Mean reversion in sales still playing out

15 December 2023

We expect Bapcor is likely to experience further weakness in sales as the company cycles through elevated demand during COVID-19. The easing of price inflation and the recovery in new car sales are headwinds. We expect declining LFL sales for both its Trade and Retail divisions at Bapcor. Moreover, Bapcor has higher operating leverage given its fixed cost base. The cost saving program is weighted to 2H24e and will help to mitigate the earnings impact.

Premier Investments (PMV) AGM trading update

Managing costs tightly

01 December 2023

Premier has provided an update on earnings for 1H24e ahead of its AGM. The decision to provide guidance that 1H24e EBIT will be near $200 million is unusual so early in the half and the lack of sales commentary makes it more difficult to gauge the drivers of the earnings change. EBIT of $200 million for 1H24e would be down 10% on the same time a year ago.

Domino's Pizza (DMP) AGM 2023 trading update

Joining the second-half club

03 November 2023

Domino’s trading update revealed that sales trends have softened in Europe and remain negative in Japan. Sales are solid in Australia/NZ. The company emphasised earnings are recovering, but the qualifier is that 1H24e EBIT is likely to be down year-on-year. Domino’s is focused on improving franchisee profitability.

Super retail (SUL) AGM trading update

A softer landing likely

28 October 2023

Super Retail Group provided a trading update to mid-October 2023 which revealed sales conditions improved slightly and gross margins are steady. The downturn in retail sales is proving orderly and predictable for many retailers. Super Retail’s net cash position provides the option to pay out another special dividend.

Bapcor Ltd (BAP) trading update

Earnings may not be better than before just yet

19 October 2023

Bapcor’s AGM trading update revealed weaker sales trends and margin pressure early in FY24e. There are some macro headwinds, but not the only factor in our view. We also expect softer sales trends to persist as price inflation eases and new car sales recover. Bapcor is raising prices and cutting costs, which should improve the earnings run-rate for the remainder of FY24e. Even so, there will be a heavy reliance on cost savings to ensure a flat NPAT outcome.

Inghams (ING) FY23 result insights

Price lead earnings recovery

19 August 2023

Inghams reported FY23 EBITDA growth of 36% on a pre AASB-16 basis. For the second-half, the EBITDA margin improved 260bp. Strong sales growth is price-driven and will support FY24e earnings. Production issues from FY22 are now resolved and volume growth should resume. Inghams is at the start of a multi-year recovery in EBITDA margins and it should achieve double-digit earnings growth.

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