Breville Positioned For FY27 Earnings Rebound

Australia | 11:10 AM

Interim results and the outlook for Breville Group exceeded market expectations as revenue growth accounts for the negative margin impact from tariffs.

• Breville Group’s interim and guidance 'beat' expectations
• Manufacturing transition largely complete
• Strong revenue growth offsets tariff-impacted gross margin
• FY26 a transition year while AI is supporting accelerated revenue growth

By Mark Woodruff

Following interim results delivered amid significant US tariff headwinds and a transition to new manufacturing facilities, analysts suggest household appliances company Breville Group ((BRG)) is well positioned to return to double-digit earnings growth from FY27 onwards.

The H1 result ‘beat’ expectations, with Morgans noting 10% sales growth was largely offset by the gross margin impact from tariff costs, resulting in a broadly flat profit on the prior year.

CEO Jim Clayton said the tariff backdrop made the half “incrementally challenging,” but added the company “minimised the impact on the P&L”. 

FY26 EBIT growth guidance for “a slight increase over FY25 EBIT” provides much-needed earnings visibility, in Morgans’ view, easing concerns the transition year could weigh on profitability for longer than expected.

Jarden highlights the transition impact from shifting to a direct distribution model in the Middle East and China, which tempered constant currency sales growth in the December half, noting the EMEA region slowed to 8% growth from 15% in the first half of 2025, while APAC eased to 4% from 16%.

Given the bulk of the manufacturing transition is now complete, Ord Minnett believes execution risk has materially reduced.

On the topic du jour, UBS also notes AI is supporting accelerated revenue growth, with in-house capabilities enhancing the customer service experience and improving the quality and speed of new product development.

Citi’s analysts describe the post-result conference call as positive, noting strong traction across new product development, AI initiatives and Beanz, the group’s global coffee bean order business.

Macquarie highlights Coffee momentum, expansion into new markets and ongoing product innovation continue to underpin outperformance versus sector peers. This broker expects Breville to keep delivering compound revenue growth of more than 10%.

Reporting by key regions North America, EMEA and APAC, the group’s two operating segments are Global Product and Distribution.

Global Product is the core business (around 89% of group revenue), covering the design, development, marketing and sale of Breville-branded products globally across Coffee, Cooking and Food Preparation. Here, products are either sold directly or through third parties and may be branded Breville, Sage, or carry a third-party brand.

The Distribution segment involves distribution of third-party appliance brands in Australia, New Zealand and certain other markets, and includes both direct and third-party distribution arrangements.

Products may be sold under a brand owned by the company, like Breville or Kambrook, or are distributed under a third-party brand, like Nespresso.

Interim results

Interim profit of $98.2m was broadly in line with the consensus estimate of $99.9m, while a dividend of 19 cents was declared versus the expected 18.5 cents.

Given residual risk from the impact of tariffs and the transition to new manufacturing facilities remains, earnings guidance appears prudent to the analyst at Ord Minnett. Going forward, this broker expects ongoing strong sales growth from all regions.

Citi highlights strong momentum in Coffee, with 1H26 broadly in line and a slightly improved outlook.

Global Product delivered 9.3% revenue growth on a constant currency basis. North America rose 11.1%, while EMEA and APAC delivered more moderate advances of 7.6% and 6.1%, respectively.

Third-party distribution in EMEA and APAC provided an around -1.5% headwind relative to underlying trends, Macquarie explains.

This analyst estimates third-party revenue declined around -24% in APAC and -6% in EMEA, reflecting timing effects rather than underlying weakness.

Coffee delivered another period of double-digit growth, while Cooking and Food Preparation recorded high single-digit gains.

In new markets, China, Korea, Mexico and the Middle East delivered revenue growth of more than 50%.

In China, management has deliberately moderated growth to ensure service standards and pricing remain aligned with Breville's premium positioning.

FY27 onwards

Jarden views FY26 as a transition year and believes investors should focus on the growth potential from FY27 onwards, supported by gross margin expansion.

The analysts see upside risk to margins, forecasting gross margin to lift to 36.0% in 2H26 and return to prior peak levels of around 36.5% by FY27, up from 35.5% at the interim result.

UBS similarly highlights attractive double-digit EBIT growth and return on invested capital (ROIC) expansion from FY27, driven by a growing total addressable market (TAM) and market share gains supporting revenue. Production efficiencies and improved execution are also expected to underpin margin and capital efficiency.

Referring to management of gross margins in the half, Morgan Stanley highlights this as another example of strong execution, demonstrating management’s ability and agility to navigate significant disruption, including post-covid supply headwinds, demand pull-forward and inventory fluctuations.

Over the medium term, Jarden expects gross margins to trend higher through an increasing Coffee mix, currently around 50%–60% of sales, and ongoing premiumisation. Longer term, this broker remains positive on structural growth in the coffee machine category, the opportunity to scale newer markets such as China, and continued market share gains.

Jarden views the current valuation of around 33 times one-year forward PE as defendable, broadly in line with the average since FY19, though sees limited scope for a material re-rating.

Tariff history and impacts

Nearly a year ago, in April 2025, management disclosed roughly 90% of products by value were manufactured in China and around 45% of products were sold into the US and said it was targeting diversification to Mexico and Southeast Asia.

By December, 80% of US gross profit was generated from products manufactured outside China, with offsets from selective tail pricing and distribution mix, but not enough to prevent the interim -130bps group gross margin decline to 35.4%.

Macquarie believes management has navigated the significant US tariff impact effectively, with 1H26 gross profit margins 90bps ahead of the broker’s expectation.

Tariff impacts have been well managed, UBS agrees, with FY26 gross margin pressure expected to reverse from FY27.