Super Retail Group reported FY22 sales up 1% and EBIT fell by 18% (52-week basis). While a fall, earnings are still well above pre COVID-19 levels and sales trends have started FY23e strongly. We expect a good 1H23e but weaker 2H23e as broader retail spending trends slow. Gross margins are likely to fall a little further and negative operating leverage could be evident in FY24e.

JB Hi-Fi reported FY22 EBIT growth of 7%, with 2H22 EBIT rising 33%. Sales momentum has strengthened slightly in July 2022 and the first-half of FY23e should see good earnings growth. Based on our analysis, it is calendar 2023 where sales could fall and profit margins decline. We are increasingly cautious on the stock given sales trends are likely to turn negative in calendar 2023.

Link to report

Metcash reported FY22 sales of $17.4 billion and EBIT of $472 million. Adjusting for the 53-week in FY22, sales rose 4% and EBIT rose 16%. The results reflects higher price inflation across all divisions and a mix-shift towards the Hardware division, which has higher margins. Metcash has been able to hold onto much of its customer gains made during COVID-19. While we expect a lack of EPS growth over the next two years, the company’s competitive position has improved in each division.