Woolworths reported FY25 EBIT down 15%. While it was a rough year, the more concerning issue is that its rebound in FY26e has been tempered by guidance. The earnings recovery will be impacted by ongoing investment in its supply chain transformation and simplification. Woolworths sales trends are likely to accelerate beyond 1Q26e as price investment and execution improve and management disruptions settle down. We lower our EPS by 7.9% in FY26e and 9.6% in FY27e given higher one-off costs.

Accent Group reported FY25 EBIT of $110 million, in line with guidance and flat on the pcp. The trading update indicated LFL sales turned slightly positive on the 2H25 drop of 1.5%. The first Sports Direct store is due to open in November 2025. Guidance provided is for EBIT growth of high single digits, close to $120 million. We forecast $115 million EBIT for FY26e, growth of 4.5% with a view that competition will crimp gross margins.

Super Retail Group’s FY25 result revealed an encouraging reversal of fortunes in the second-half. While 1H25 EBIT fell 7%, 2H25 EBIT rose 9%. The better gross margin and lower cost growth in 2H25 are likely to support earnings in FY26e. While margins are better, sales trends remain volatile and we only forecast 2% EBIT growth in FY26e. There will be a drag from higher overhead costs. While margins are improving, the sales backdrop is unlikely to accelerate much making it difficult to accelerate earnings growth.

The Australian consumer sector is likely to report a wide divergence in fortunes this reporting season. Even though sales trends are improving, operating cost growth is elevated and gross margin gains are fading. The companies with the best earnings growth for FY25e are likely to be Breville, GyG, Harvey Norman, Lovisa, Sigma and Treasury Wines. For most of these, consensus expectations are already high and commentary on current trading and costs will influence share prices. At the other end, retailers with double-digit declines in earnings are Endeavour, Myer, Nick Scali and Woolworths.

Accent Group’s trading update showed deteriorating sales trends, with comparable sales turning negative since March 2025. As a result, 2H25e EBIT will be down 23%. We expect sales growth to be below cost growth again in FY26e resulting in EBIT of $102 million, down 7%. The concern is Skechers is mature and Platypus may decline. With issues in portions of the core business, execution risk is elevated. Positive comp sales are essential in a high cost growth environment and will need to recover to offset the growth in wages and rents.

The Myer strategy day gave a clearer view of the business in its current form and addressed many initiatives to drive improvement. Strategies previously outline are on track to be delivered in FY27e. There are several initiatives underway with no long-term targets provided yet. As Myer delivers on initiatives we expect to hear more on targets.

Super Retail Group’s trading update shows a slight slowing in sales but bigger drop in gross margins. The pressure on gross margins is most acute in Supercheap Auto based on our feedback and could carry through to 1H26e.

Endeavour Group reported 3Q25 sales down 1.7%. The Retail division shrank further, while Hotels had a good quarter. The good news for the company and shareholders is the decline in retail sales should now be over. We forecast Retail comp growth of 2.1% for 4Q25e and 3.0% for FY26e. Hotels should see stronger growth, but investors should factor in an earnings dip associated with cashless gaming in Victoria from the end of 2025.

The agreement with Frasers Group gives Accent Group a 25 year licence to operate Sports Direct in ANZ. Frasers Group will also increase its holding in Accent Group to 19.6% providing $60 million in funding for the initial phase of the rollout. With a 50 store within six years target, Sports Direct provides a new growth path with additional sourcing and product benefits for the group.

At a time when core footwear banners for Accent Group appear to be reaching maturity and competition is impacting margins, Frasers Group is looking to establish a physical presence via Sport Direct. Sports Direct creates the opportunity for further store growth with category expansion. With weakness in the core from a lower forecast store count and weaker gross margin, we lower our current earnings forecasts for Accent Group. We have increased the probability weighting to a Sports Direct entry to 90%.