Woolworths reported sales up 4%, but EBIT down 14% in 1H25. We expect the company will have a challenging 2H25e as well. Management is starting to address its challenges. CEO, Amanda Bardwell, said that the company will assess the shape of its business portfolio. Each business unit must have reasonable prospects on a 3-5 year view. Overhead costs are being cut and there is a tougher stance on the low returning Big W and NZ divisions.

Inghams reported 1H25 poultry volumes down 2.7% and EBITDA dropped 10%. Price realisation was good and Inghams had feed cost reductions and admin cost savings to partly offset the volume decline. Prices are 19% higher than three years ago. This is important as it signals that new contract wins to replace lost volume with Woolworths has not been done at irrational prices.

Breville reported 1H25 sales growth of 10% and EBIT growth of 11%. The result was characterised by strong sales across all geographies and particularly in coffee machines. We expect the company to sustain good sales growth, helped by a step-up in product development, marketing and the addition of new markets including China. 

JB Hi-Fi reported 1H25 sales growth of 10% and EBIT growth of 9%. Impressive top line growth was hampered by a decline in gross margins and elevated operating cost growth. While good sales trends should continue, the results provide a reminder that gross margin declines are a risk and operating leverage is low. The company’s large cash position does bode well for further special dividends. While dividends and cash flow are attractive to some investors, the valuation remains steep in our view. 

Nick Scali delivered a better than expected earnings result and the gross margin recovery since the AGM guidance was a standout. We see 2H gross margin holding flat on last year for ANZ, with group gross margins at 62.3% for FY25e. Initial signs of UK improvement and hints of greenfield expansion has seen confidence grow in the UK rollout. There is, however, now little room for error in execution.