Harvey Norman reported 15% EBITDA growth in 1H26. Sales growth was solid in both the key markets of Australia and New Zealand and profit margins expanded with better cost control. Harvey Norman’s sales trends are likely to slow in Australia and NZ over the next 12 months, but we expect it to be a mild slowdown. The improved inventory position for franchisees bodes well for margin expansion in 2H26e.

Harvey Norman reported FY25 PBT growth of 9% with much stronger growth of 19% in 2H25. Sales trends are strong at the start of FY26e, which bodes well for the year ahead. However, the company was lapping a weak result from a year ago. We forecast FY26e comp sales growth of 4.5% for Australia and 6.0% for New Zealand. With better sales, what profit margin upside can we expect? Given Harvey Norman’s margins are near long-term average and cost growth may rise in FY26e, we expect the operating leverage to be a little lower than usual. PBT margins may rise 70bp. We forecast group network sales growth of 6% and PBT growth of 18% in FY26e.

Harvey Norman reported 1H25 system sales growth of 4% and EBITDA up 4%. Sales trends have improved in absolute terms and relative to market in Australia. The company’s 1H25 result also indicates a better inventory position in Australia, which should support sales and profit margins. While all the key metrics look better for the company, its growth potential is still low in our view and increasingly based on offshore growth.

Harvey Norman reported FY24 EBITDA down 11% with a drop in Franchising and New Zealand earnings and increase in its property earnings. The company has lost market share in both Australia and New Zealand over the past five years and its EBITDA margin recovery is yet to emerge. We expect New Zealand to remain a headwind in FY25e but Australian earnings should rise slightly. The quality of the FY24 result was low with reduced lease amortisation supporting earnings.

Domino’s 1H24 result revealed mixed information. Same store sales growth momentum has improved early in 2H24e and is an encouraging sign. However, the underlying cost growth for the business looks elevated and franchisee profitability is well below levels that will reignite store openings. While earnings may have troughed, we expect an acceleration in store growth is two years away given such low franchisee profitability.

Domino’s reported network sales down 4% and EBIT down 21% in 1H23. The worrying sign near-term is weak same store sales growth (SSSg) trends persisted into 2H23e and the company has seen a volume reaction to its price rises, limiting its much-needed improvement in system profitability. Our primary concern is the deterioration of franchisee profitability which is trending 30% below recent peaks and at a level that will discourage new store openings.

Domino’s AGM update gave some positive signs about sales trends improving, but also solidified concerns about the challenge in raising prices to cover higher costs. The company is planning for a much better 2H23e, which looks difficult to achieve in our view, particularly given franchisee profitability is falling.