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Premier Investments (PMV) FY23 result insights

The Downturn begins

29 September 2023

Premier Investments FY23 result revealed a slowdown in sales and gross margin pressure in the second-half. The company found sufficient flexibility in its cost base to soften the 2H23 EBIT decline to only 4%. For FY24e, we expect weaker sales, lower gross margins and more cost inflation.

Costa Group (CGC) 1H23 result analysis

Produce Pressures Purchase Price

05 September 2023

Costa Group reported overall EBITDA up 7% in 1H23, with International EBITDA up 43% and Produce EBITDA down 53%. The weakness in Produce earnings reflects poor price realisation and rising costs. While conditions may improve slightly in 2H23e, it is more a FY24e and FY25e debate about the normalisation of citrus quality and pricing.  The earnings drop impacts the bargaining power of Costa with Paine Schwartz (potential suitor).

City Chic (CCX) - FY23 result analysis

Trimming sales

05 September 2023

City Chic had an incredibly challenging FY23. Sales declined and gross margins were crushed. The company made an EBITDA loss (pre AASB-16) of -$35 million for the continuing business.  However, there is light at the end of the tunnel. The sales decline should abate by the end of 1H24e. The company has a net cash position and a clear path to profit margin recovery over the next three years.

Harvey Norman Holdings (HVN) - FY23 result analysis

Decline not over yet

05 September 2023

Harvey Norman reported a large drop in 2H23 earnings with EBITDA down 29%. The fall reflected lower sales and significant operating leverage.  An increase in its licence fees for offshore masked a larger fall in Franchise segment margins. Given declining sales likely in 1H24e, we expect EBITDA to drop further. With a declining sales and earnings backdrop, combined with devaluations of its property book, we remain cautious.

Domino's Pizza (DMP) FY23 results analysis

Cost outs to drive earnings

25 August 2023

Domino’s FY23 EBIT of $202 million is likely a trough given the company’s cost saving program. While pleasing, the lingering concern we have is focused on is weak franchisee profitability, which will limit new store openings. Moreover, Domino’s balance sheet may avoid any major capital raising, but it is also constraining support for franchisees when compared with offshore peers.

Woolworths (WOW) FY23 result analysis

Margin deliverance

25 August 2023

Woolworths reported FY23 sales up 6% and EBIT up 16% and the result  was characterised by a return to more normal trading patterns. EBIT was up 3% excluding the impact of an unwind of COVID-19 costs in the prior year. The Woolworths Food division had a strong improvement in margins, which bodes well for FY24e and its investments in adjacencies is supporting higher margins than major peer Coles. We expect elevated capex to continue over the next two years given supply chain investments, which should deliver a return.

Coles Group (COL) FY23 result analysis

Profit margins pinched

24 August 2023

Coles reported underlying EBIT down 5% for 2H23 in its Supermarket division. The drop in profit margins was a function of both gross margin pressure from rising theft and higher operating cost growth. Unfortunately for the company, these trends will persist into FY24e leading to a drop in EBIT margins. FY24e should be a trough in earnings. However, margin expansion is largely contingent on its capex projects delivering a return and it may take 2-3 years to prove success on this front.

Super retail (SUL) FY23 result insights

Sales downturn underway

21 August 2023

Super Retail Group reported FY23 EBIT growth of 10%. For the second-half EBIT dropped by 4%. Sales trends have held up well so far and the company has reduced its inventory. However, conditions are likely to be more challenging over the next year. As a result, profit margins will fall. The company will also have rising overheads and costs associated with its loyalty program in FY24e.

Treasury Wine (TWE) FY23 result analysis

Revenue growth the focus from here

18 August 2023

Treasury Wines reported FY23 EBITS up 11%. The second-half rose by 6%. While the profit result was decent, the sales performance was poor, particularly in the Americas. Margin targets have largely been met and the company needs to kick start revenue growth from here. We expect revenue to rebound in 2H24e. The lower Australian dollar will represent a meaningful contribution to the achievement of “high single-digit” EBITS growth in FY24e.  The key share price driver remains an unwind of tariffs in China, which may happen within the next six months.

Endeavour Group Ltd (EDV)- Cost headwind to impact FY24e

FY23 result analysis

18 August 2023

Endeavour Group reported FY23 sales up 2% and EBIT up 11%. The debate is whether the company can cut costs sufficiently to ensure profit margins do not fall in FY24e. The company faces cost growth of 7% on our estimates and sales growth is more likely to be 4%. While a combination of gross margin gains in its Retail division and some cost savings should help, we expect modest margin compression. Another headwind in FY24e will be higher net interest costs.

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