Domino’s reported network sales down 2% and EBIT up 1% in 1H26.  The company is pursuing cost savings and lower discounting aggressively. However, so far the drop in same store sales seems larger than the gross margin gain for franchisees. We expect SSSg to decline in FY26e and return to very modest growth in FY27e as the company focuses more on gross margins. A good portion of targeted cost savings will be passed onto franchisees. Even so they account for less than half the required lift in franchisee EBITDA. Domino’s is taking decisive action to restore profitability but we expect the stock to be range bound until the new CEO starts by August 2026.

Domino’s remains a topical stock with debates about its appeal as a takeover target and also as a cost out opportunity. In our view, these two debates need to accompany a discussion about its weak sales growth and poor franchisee profitability. Without an acceleration in same store sales, cost savings will be difficult to bank for shareholders. If franchisee profitability does not improve, there is a risk there will be more store closures globally.

Bapcor’s trading update revealed ongoing sales declines and a sharp drop in profit margins for 1H26e. The company’s discovery of poor business practices highlights the complexity in the group and the need to simplify. Based on current trends, sales should stabilise in 2H26e and cost savings are likely to trigger a margin recovery. On our estimates gearing will stay below covenant levels and free cash flow should help reduce debt.

Domino’s reported FY25 EBIT of $198 million, down 5%. The result showed very weak sales trends across all geographies and EBIT margin declines for Asia are a concern given the significant store closures should have improved profitability.  Franchisee profitability is flat and well below healthy levels, raising the risk of more store closures. The decision to reduce discounting is dangerous in our view as the margin uplift may be wiped out by lower transaction volumes.

Domino’s recently announced that its relatively new CEO Mark Van Dyck would step down. While the Board is supportive of his strategic plan, it wanted faster progress. The limited detail we have on its strategy shows a focus on improved profit margins more so than store growth. We expect limited sales growth and margin recovery will only be evident in 2026 onwards.

Woolworths has had a rough FY25 for a range of reasons. However, looking forward, we are more interested in the company’s strategic direction under CEO Amanda Bardwell. We expect more details in coming months that may lead to further “simplification” or cost savings and decisive action on underperforming businesses like Big W, HealthyLife and Marketplus. Woolworths is also likely to double-down on its core proposition as “the fresh food people”. In this report, we assess the extent of any potential strategic shift by Woolworths and the implications for the broader industry. As Woolworths recovers, others will feel the impact.

Bapcor reported 1H25 underlying sales up 0.3% and EBITDA of $132 million, down 8%. Sales have started the second half up slightly. The full year cost saving guidance for $20 to $30 million has been reiterated and will lead to lower total costs in 2H25e, supportive of an improvement to EBITDA. Bapcor will host a Strategy Day in late April 2025 at which the new CEO will provide more clarity on the strategic direction.

The new information in Domino’s 1H25 result about its franchisee profitability and pending strategic update leave a degree of uncertainty on the stock. Franchisee profitability is still 34% lower than where it needs to be. We expect a strategic update in May or June 2025 to focus on margin improvement opportunities. Given EBIT margins are 5% vs a potential of 7%, the upside is meaningful. Domino’s will need a new investor audience attracted to the margin upside, because store growth is likely to be lower.

Domino’s trading update and news of store closures in Japan signals a clear shift towards improving profit margins and existing store sales productivity. We expect profit margins to improve from 5% last year to 7% medium-term. The unknown is whether this occurs by shrinking the network further.

Endeavour Group reported FY24 EBIT up 1.8% on a 52-week basis and EPS dropped 4.3% given higher finance costs. We expect a flat EPS of 28.6 cents for FY25e with subdued 1H25e sales growth and higher finance costs largely offsetting better gross margins and cost savings.  Endeavour’s underlying sales momentum shows market share gains and cost savings are likely to continue to build in FY26e.