The February 2022 reporting season for retail, food and beverages is likely to show a wide dispersion in performance amongst companies. While sales trends have been good across the board, some have converted that to earnings better than others. We expect good results from household goods retailers like Harvey Norman but are below consensus on earnings for Domino’s and Endeavour Group. We expect stocks to be influenced by trading updates for January 2022 sales and commentary about price inflation and cost pressures. The full report provides a preview of major ASX-listed retailers potential earnings results.

Australian retail price inflation has been low for a long time. However, input and supply chain costs have increased substantially in the past year. What if we had 5% inflation in both food and non-food in 2022? This is a hypothetical question to raise the debate about the implications of higher retail prices. High price inflation is likely to boost retail earnings in the first 12 months. If we have 5% price inflation, the upside to earnings is 6%-12%.