Accent Group reported FY24 EBIT of $128 million, adjusted for impairment, down 1% against a 52-week comparable. The trading update of like-for-like sales of 3.5% was a slowdown on the 4.1% achieved in 2H24. A lower 2H24 gross margin, explained by an inventory write-down, was in contrast to the 136bp gross margin improvement in 1H24. Given positive trading momentum, structural gross margin improvement strategy and the exit of underperforming banners and sites we see Accent Group growing earnings by a 9.5% CAGR over the next 3 years.

Breville’s FY24 result highlighted better 2H24 sales trends in EMEA and the Americas. The company is likely to deliver good revenue growth in FY25e from these regions given new product launches and extended geographic reach. Breville is investing for growth with increased product development costs, while at the same time generating good cash flow.

The spike in spot sea-freight rates is likely to remain topical over the next few months and add to concerns about retail profit margins in FY25e. Our feedback is that spot sea freight rates for Australian importers are now close to 3x the low point seen only 12 months ago. The good news is many retailers have 12-month contracts. The bad news is that it looks like a step-up in freight rates is coming either way as we move through FY25e and adds risk to earnings. The retailers most exposed to higher sea freight rates are Nick Scali, Wesfarmers and Super Retail Group.