City Chic reported FY22 EBITDA of $47 million (pre AASB-16), up 11%. The result was characterised by very strong revenue growth, but margin dilution from lower margin acquisitions and higher fulfillment costs.  We expect sales growth to slow in FY23e to 6% as online demand normalises globally. We see further downside in gross margins given higher fulfillment costs seen in 2H22. We forecast FY23e sales of $392 million and EBITDA of $50 million. We have lifted our EBITDA forecast slightly from $49 million previously.

JB Hi-Fi provided a FY22e trading update with consistently strong sales and better gross margins in 2H22e. EBIT was 9% ahead of our forecast. The strength in sales, tightness of inventory and price rises make us more bullish in the near-term (FY23e) but more cautious on FY24e. With a net cash position, good dividend yield and low PE, we expect the stock to perform well.

Endeavour Group reported 1H22 EBIT of $556 million, up 3%. The result was driven by gross margin gains in the Retail business. The company also did a good job in managing costs given the disruptions from COVID-19 during 1H22. We expect most of the gross margin gains seen in recent years to be retained, particularly given the growth of Pinnacle Drinks. However, we are cautious about the performance in FY23e. Overall, we forecast FY23e EBIT growth of 4%, which comprises a 9% fall for Retail and 37% EBIT growth in Hotels.

JB Hi Fi reported a good 1H22 result given the very elevated base from the prior corresponding half. Given its update in mid-January 2022, the new insights from the release showed solid January 2022 sales trends and a good gross margin result in The Good Guys. We expect stable sales and continued healthy gross margins to result in a fade in earnings rather than a fall off the cliff over the next two years. JB Hi-Fi also announced an off-market buyback of $250 million. We expect the company to continue holding a net cash position at the end of FY22e even after the buyback.

Harvey Norman provided an encouraging AGM trading update with recovering sales trends in the past two months and continued strong profit margins. Australian sales improved from -19% in July-August to -6% for September-November. Profit margins are holding up well with three-quarters of the gains seen in FY21 retained in 1H22e so far.