JB Hi-Fi reported 1H25 sales growth of 10% and EBIT growth of 9%. Impressive top line growth was hampered by a decline in gross margins and elevated operating cost growth. While good sales trends should continue, the results provide a reminder that gross margin declines are a risk and operating leverage is low. The company’s large cash position does bode well for further special dividends. While dividends and cash flow are attractive to some investors, the valuation remains steep in our view. 

Domino’s investor trip to Germany and France highlighted the role of online food aggregators is significant and partly explains the weakness in France and strength in Germany. Franchisee profitability can lift with higher order count which will be driven by product innovation and growth on the aggregators. While we are more positive, we have two notes of caution. Firstly, we expect the company to step back from the timelines for its long-term store growth and store growth may be 3%-5%, not 7%-9% per annum. Secondly, consensus expectations for sales growth and margin expansion need to be lowered over the next three years.