Temple & Webster reported FY26 EBITDA of $22 million, up 17%. Temple’s strategic pivot impacted the trading update in which sales fell 13% but contribution margin dollars improved by 10%. We lower our sales forecasts but lifted our gross margin assumptions. The debate will be whether the pivot to profitability makes reaching a double-digit sales attainable or necessary to drive earnings.

Our research shows that housing churn is the strongest driver of household goods sales across Australia, the UK and NZ. Housing churn, which represents the loans on owner occupier homes and refinancing, is driven by changes to interest rates with a three month lag. Given different interest rate cycles, we forecast housing churn to drop 10% in Australia, but better outcomes in the UK and NZ in FY27e. There is a strong chance that furniture sales decline by 4% in Australia creating earnings risk for Harvey Norman, Nick Scali and Temple & Webster. JB Hi-Fi will see a slowdown in electronics categories too.

We have updated our store forecasts to correct for our store scrape analysis that had included clearance stores. Nick Scali presents stores on an ex-clearance store basis which were erroneously reflected in our previous report. Having corrected our store assumptions, we still see sales growth for the Nick Scali group driven by stores openings and the UK. The store growth opportunity for Nick Scali both domestically and internationally is attractive.

Harvey Norman reported 15% EBITDA growth in 1H26. Sales growth was solid in both the key markets of Australia and New Zealand and profit margins expanded with better cost control. Harvey Norman’s sales trends are likely to slow in Australia and NZ over the next 12 months, but we expect it to be a mild slowdown. The improved inventory position for franchisees bodes well for margin expansion in 2H26e.

Nick Scali delivered 1H26 EBIT of $68.5 million, up 25%. NPAT of $41 million was ahead of both guidance and Visible Alpha consensus. The group gross margin increase of 318bp, surprised to the upside and resulted in 65.4% for the half. Nick Scali’s ANZ trading update for January like-for-like written sales orders at 3.1% highlighted a deterioration in momentum. We have lowered our sales forecasts but lifted gross margin expectations.

Temple & Webster reported 1H26 EBITDA of $13.5 million, up 2.2%. The EBITDA margin of 3.6% for 1H26 was within the guidance range of 3-5%, but on the low end, as promotional activity was used to drive a sales outcome. We lift our sales forecasts but lower our delivered margin to reflect a more promotional environment. The Temple & Webster model continues to deliver market share gains and over time scale will drive margin improvement.

Australian retail sales rose 4.7% year-on-year for December 2025. This was a solid end to the year and the December quarter showed growth of 5.8%, which was above trend. It is important to call out the strength of non-food, which was 7.1% across the December quarter, an unusually strong result. We believe we have just seen the peak in retail sales growth, with a gradual slowdown over 2026 likely.

Australian retail sales rose 6.9% year-on-year in November 2025 according to ABS data. The shift of ABS data source does makes us cautious about the magnitude of the reported strength in sales. Even so, it does suggest another strong month in non-food. Household goods such as furniture, electronics and hardware, had the strongest growth up 10.6%. At-home food and liquor was weakest at 3.6% growth.

We transfer coverage of Temple & Webster from Scott Hudson to Garth Francis. In this report, we cover the company’s potential market share penetration, our forecasts for customer acquisition cost and possible category expansion.  Temple & Webster trades at an elevated multiple, reflective of the substantial growth opportunity. Any slowing in sales growth which may come from a competitive threat from industry incumbents or established retailers entering the category, could negatively impact the share price.

Nick Scali’s AGM guidance was a miss to Visible Alpha consensus for 1H26e. However, the trading update showed strong sales momentum in ANZ and a clear path to breakeven in the UK. The ANZ guidance implies either flat gross margins or elevated costs. Sales momentum will need to continue in a highly promotional environment to offset cost growth. The UK is tracking well to reach breakeven and could exit 2H26e with a small profit. The promotional environment in ANZ presents a risk to gross margins.