Australia | 1:22 PM
Breville had to navigate tariffs, war-related supply shocks and forex headwinds in FY26, yet still delivered a solid result, and growth prospects abound.
- Breville Group delivered strong FY26 sales growth (constant currency)
- Exceptional growth in new geographies
- New product development pipeline strongest in years
- Growth drivers line up for FY27
By Greg Peel
Consumer electronics company Breville Group ((BRG)) was once best known for its sandwich toasters, but these days also sells food processors, juicers and air fryers among other kitchen items, but most successfully, it moved into in-home coffee machines.
Breville delivered $207m of earnings in FY26, up 1% year on year and in line with guidance, in what Morgans describes as an exceptionally challenging year as the group navigated a volatile US tariff backdrop and ongoing supply chain shocks via geopolitical conflicts.
Foreign exchange headwinds were significant in the period. Morgan Stanley observes Breville posted 6.7% FY26 revenue growth and 2% in the second half at the headline, implying a half-on-half growth slowdown after 10%-plus in FY25 and the first half FY26.
But in constant currency terms, group sales rose 9% and Global Product 9.7% in FY26. In fact, Global Product growth actually accelerated in the second half on a constant currency basis, to 10.4% versus 9.3% in the first half.
Breville saw double-digit growth in coffee and cooking, with food preparation up single digit in FY26.
The earnings margin fell to 11.4% from 12.1% on -60 basis points of gross margin contraction to 36.0% concentrated in the first half (35.4%), with the second half recovering to 36.8% versus consensus of 35.7% and back to the peak level seen in the first half FY25, Jarden notes.
Morgan Stanley highlights the margin increase was achieved in the second half despite marked uncertainty from tariffs, raw material price inflation, manufacturing diversification, and historically weaker second half seasonality.
Breville finished the period with healthy net cash position of $104.4m, compared to $48.5m a year ago.
The Trump Factor
Breville enjoyed $59.6m of Liberation Day tariff refunds but these were largely offset by a -$55.2m supply chain provision, Macquarie notes.
The net benefit was more than offset by higher freight, Trump’s earlier, legally allowable steel tariff, and spikes in other input costs due to the Middle East conflict, such as resin.
One driver of further near-term gross margin upside is lower tariffs for the current manufacturer base (which is becoming more efficient, UBS notes), despite ongoing tariff and Middle East uncertainty.
Expanding Footprint
Global Product sales grew 9.7% on a constant currency basis, with each key region delivering solid growth: Americas up 10.8%; Asia-Pacific 8.3%; and Europe 8.5%.
Analysts seem most excited about new markets, where Breville is transitioning more markets from distributed to direct. These “young” markets of China, South Korea, Mexico and the Middle East grew a collective 74% in FY26, compared to 50% in the first half.
Breville’s growth in operating expenditure, up 6.8% year on year, was heavily weighted to growth drivers and new market expansion, Macquarie notes, representing some 91% of the increased opex.
On the flipside, the company’s manufacturing transition means 85% of 120-volt product Gross Profit Dollars are now sourced outside China.
Growth Drivers
New product development (NPD) has been critical to Breville’s success. NPD is to accelerate now that the “hard lifting” on manufacturing diversification is behind the company.
Morgan Stanley sees scope for meaningful acceleration in FY27-FY28 from solid product pipelines, providing further conviction in the growth outlook.
The NPD pipeline over the next 24 months is the strongest it's been in years, Morgans notes.
North American distributor Best Buy's 300 store-in-store rollout (completed last November) is off to a positive start, driving a material step-change in sell-out performance and higher average selling prices in these locations.
In combination with improved margin stability following the group's manufacturing relocation in FY26, Morgans views these factors as supporting a return to sustainable and normalised earnings growth, de-risking the likelihood of the reset year extending into FY27.
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