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Presentation: Update to retail sales forecasts in FY25e

Recovery is underway

25 October 2024

The link provides a presentation associated with a webinar we held. The webinar addressed our updated outlook for retail sales and the drivers of a recovery in retail spending. In the presentation, we answer the question of whether consumers will spend or save their income growth, quantifying the impact of rate cuts and tax cuts, which retail categories we expect to outperform in FY25e, and a comparison of Australia with offshore markets.

City Chic (CCX) - FY24 result analysis

Through the worst

03 September 2024

City Chic reported an FY24 pre-AASB 16 EBITDA loss of $19 million, an $8 million smaller loss than in FY23. This was a beat to the guidance of -$22 million provided at the time of the capital raising in June 2024. City Chic’s trading update showed positive comparable sales up 9.9% and further, provided revenue guidance of $142 to $160 million for FY25e.

Presentation: Retail sales outlook for FY25e

Webinar presentation

29 July 2024

The link provides a presentation associated with a webinar we held. The webinar addressed the updated outlook for retail sales and key drivers that could trigger an improvement in spending. In the presentation, we provide an update on the outlook for retail sales, covering feedback on recent trading and expectations for FY25e. We will address which categories have the best potential for volume recovery and how they are navigating price disinflation. We will also address the risk from interest rates on retail. The presentation also includes insights about retailer profitability, inventory levels, and expectations for retail trading at the FY24e results in August.

Breville (BRG) - Initiation of coverage

Caffeine Fix

09 April 2024

We initiate coverage on Breville group, a global kitchen appliance developer that has achieved very strong sales growth in recent years, particularly in the coffee category. After a soft FY24e, we expect solid sales growth to resume in FY25e and beyond with household penetration, new markets and new products all supporting sales growth of 6%-9%. While gross margins should also expand, the company will need to invest in advertising and product development to sustain momentum.

Super Retail (SUL) Trading update for January 2024

Gross margin cushion

17 January 2024

Super Retail Group provided a trading update highlighting that sales held up relatively well in 1H24 and gross margins were up slightly. Like many retailers, gross margins are proving to be a cushion to the weakness in sales and elevated cost growth. We lift our EPS forecasts by 7% in FY24e and 3% in FY25e. While a positive update, we expect sales trends to be soft from here and cost growth will outstrip sales growth for two consecutive years.

Bapcor Ltd (BAP) - sales outlook

Mean reversion in sales still playing out

15 December 2023

We expect Bapcor is likely to experience further weakness in sales as the company cycles through elevated demand during COVID-19. The easing of price inflation and the recovery in new car sales are headwinds. We expect declining LFL sales for both its Trade and Retail divisions at Bapcor. Moreover, Bapcor has higher operating leverage given its fixed cost base. The cost saving program is weighted to 2H24e and will help to mitigate the earnings impact.

City Chic (CCX) AGM 2023 trading update

Inventory clearout almost done

23 November 2023

City Chic’s trading update showed that sales trends remain weak, but the company is rapidly clearing excess inventory. The sales declines are likely to ease by the end of calendar 2023. Gross margins could recover by 20 percentage points in 2H24e. City Chic’s past mistake of excess inventory is being corrected.

Endeavour Group (EDV) 1Q24 sales result

Focusing on returns

03 November 2023

Endeavour reported group sales growth of 2.1% in 1Q24. The underlying trends were similar for both the Retail and Hotels division and we expect growth to remain near this rate over the remainder of FY24e. In Retail, the company’s revenue growth is catching up to market growth, but industry-wide volumes are in decline. In Hotels, the company is stepping back from acquisitions, focusing more on renewals and redevelopments.

Harvey Norman (HVN) trading update Sept 2023 quarter

A deeper downturn in earnings

31 October 2023

Harvey Norman provided a trading update informing the market that sales are in decline, profit is down almost 50% so far and it will consider buying back shares. Harvey Norman is undergoing a rapid reset of earnings post COVID-19. The concern on our mind is the loss of market share in Australia and NZ over the past four years. The unknown is how much of its weaker sales and earnings is a function of excess inventory. Earnings are likely to trough this year, but the recovery may underwhelm, particularly as its retail property is revalued lower.

Super retail (SUL) AGM trading update

A softer landing likely

28 October 2023

Super Retail Group provided a trading update to mid-October 2023 which revealed sales conditions improved slightly and gross margins are steady. The downturn in retail sales is proving orderly and predictable for many retailers. Super Retail’s net cash position provides the option to pay out another special dividend.

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