Harvey Norman reported FY26 EBITDA up 8%. However, cracks are emerging with sales slowing and Franchise segment EBITDA dropping in the second-half. Conditions are likely to deteriorate over the next 12 months, especially if Harvey Norman continues to fund more franchisee discounting. Sales are also falling in NZ, Harvey Norman’s second largest market. Harvey Norman usually delivers more operating leverage than other large retailers. As we enter a downturn in the housing cycle, lower sales will reduce earnings.

Super Retail Group reported a decline in FY26 EBIT of 3%, but gross margin improvement combined with tight cost control bodes well for EBIT growth in FY27e. We forecast EBIT growth of 6% for the year ahead, with higher gross margins the key driver. Rebel is improving its inventory and promotional management and the higher Australian dollar will lower the cost of goods. While we see an improvement in EBIT, the economic backdrop will be a headwind.

JB Hi-Fi reported FY26 EBIT up 4%, with second-half EBIT down 3% and a sign of the challenges ahead as sales trends slow. We expect EBIT to fall 3% in FY27e with very low sales growth the primary headwind. We forecast FY27e comparable sales growth of 0.5% for JB Hi-Fi Australia and -0.3% for The Good Guys. The macro headwinds are accelerating with lower income and reduced wealth likely to hurt the December half-year sales. The company is optimistic new products and more supplier funded discounts will be an offset. We are not convinced.

The RBNZ remains on hold while the RBA has already raised rates three times this year. New Zealand retail sales began recovering in the September quarter 2025 and the income backdrop remains good for NZ consumers despite the risk of higher inflation and interest rates. We forecast New Zealand retail sales growth to hold at 4.2% over FY27e, with 3.6% growth in at-home food & liquor and 4.6% in non-food retail. The retail sales cycle in New Zealand may be more uncertain in FY27e, but the long-dated impact of rate cuts is still a tailwind, along with improving net migration and employment growth. Key retailers that have earnings upside in NZ are Ampol, Woolworths and Harvey Norman. To a lesser extent, JB Hi-Fi and Nick Scali will see upside to earnings but both have a very small store network.

Sigma’s trading update revealed a small, but notable improvement in sales trends and an entry into the UK through a joint venture. Improved sales trends appear to be driven by GLP-1 drugs, resulting in margin dilution. The UK joint venture is small with five stores to be trialled in the Chemist Warehouse format in London. While Chemist Warehouse has impressive growth, expectations are high and the patience of company management may be higher than the patience of the market.

Now that reporting season is over for Australian retail, we have finalised the themes and issues observed during 1H26. This is important context as there are now quite a few body blows facing the consumer – higher interest rates and higher petrol prices clearly add risk to the retail outlook. The impacts are likely to be more significant in the 1H27e fiscal period and more painful in housing-related retail categories and takeaway food.

Super Retail Group reported 1H26 EBIT down 3%. The weaker result reflected elevated promotions in Rebel and weak sales in BCF. These issues should pass as Rebel’s inventory levels are lean and BCF has already seen an improvement in sales trends. We are positive on earnings outlook over the next two years helped by improving gross margins. Super Retail may see a 70bp gain from the higher Australian dollar. Super Retail Group have arranged an investor day on the 11th June 2026.

Woolworths reported 14% EBIT growth for 1H26, helped by improving sales trends and more consistent execution across its divisions. While a good result, there was a low base in the previous corresponding half. Woolworths sales trends may slow from here and the margin gains in eCommerce and Digital & media will be difficult to repeat. The outlook for FY26e through to FY28e is good as margins recover further and supply chain investments deliver a return. The PE premium to Coles is back to its long-term average.

JB Hi-Fi reported 1H26 EBIT up 8%. The drivers of the result were good sales growth and a slight tick-up in gross margins with higher operating cost growth. The company’s sales update for January 2026 highlighted a slowdown in momentum, which is likely to play out in calendar 2026. We expect comparable sales growth of closer to 3% for JB Hi-Fi Australia and The Good Guys over the next 18 months. In particular, JB Hi-Fi Australia has a high hurdle in the June 2026 quarter. Even though sales are slowing, the ability to extract margin support from suppliers is strong and there is flexibility in the staff cost base.

Bapcor reported a 4% decline in EBITDA for FY25. The decline in both the Trade and NZ division’s profit margins was notable in the second-half. We expect the company to have another decline in sales for 1H26e given some store closures and a more competitive environment in Australia and NZ. The NZ segment’s margins look to be resetting lower following a COVID-19 peak. Even so, margins are still healthy relative to peers. The company’s indication that profit will skew to 2H26e is vague. The shape of earnings suggests the profit recovery begins in FY27e.