What to watch this reporting season: a primer
Earlier this week, we published our Financial Year 2025 (FY25) Reporting Season calendar, so make sure you have a look at that. Here a quick overview of what you could be watching for as Australia’s FY25 reporting season gets underway.
While equity markets have demonstrated resilience through the first half of the year, this earnings season could prove to be an inflection point – one that will either reaffirm confidence or expose the cracks beneath recent optimism.
With economic growth softening and further interest rate relief likely, investors might demand more than headline earnings-per-share (EPS) beats.
A primer: what reporting season means for investors
Every August, ASX-listed companies with June year-ends release their full-year results.
These announcements will typically include audited financials, including revenue, profit, and cash flow metrics, for FY25. They’ll also include dividend declarations and capital management updates. But perhaps most importantly, CEOs will share their outlooks for the year ahead, including for some companies, FY26 guidance and trading updates for July and the first weeks of August.
It’s this combination of backward and forward-looking data that gives investors their most comprehensive health check on corporate Australia.
Our expectations are:
- Results will be judged on more than just profit
FY25 earnings will be dissected not just for absolute growth but for how that growth was achieved. We expect investors will look beyond headline numbers to the quality of earnings and ask:
- Did top-line growth come from pricing power or volume recovery?
- Were margins protected through genuine productivity gains or short-term cost cuts?
- Are companies demonstrating scale efficiencies, or masking weakness with accounting levers?
The bar is always rising, and investors will want to see that earnings durability isn’t just a function of cost containment – but of successful strategic and/or tactical execution amid an admittedly more challenging environment.
- FY26 guidance: credibility over optimism
It’s always the case that the results are a look at the past. Last year’s numbers generally shouldn’t surprise by much, because if they were going to, the company is required to ‘update’ the market during confessions season – the latter part of June, before books are closed for the full year.
And so, the outlook statements accompanying these results will carry disproportionate weight. Investors are typically sceptical of overly bullish forecasts, especially in a climate where household consumption is slowing, geopolitical risks are intensifying, monetary policy could be more accommodative and where Trump’s policies, and their impacts, are unpredictable.
Companies that spell out their expectations with a mix of pricing, volume, and margin drivers, will be rewarded with investor trust.
- Capital management back in focus
With cost of capital still elevated and economic visibility patchy, companies remain under pressure to demonstrate disciplined capital allocation.
Keep a lookout for sustainable dividend payout ratios, evidence of stable or improving return-on-invested-capital (ROIC), and sensible capex plans aligned to realistic growth trajectories.
Meanwhile, boards that preserve cash buffers while maintaining shareholder returns could be viewed more favourably than those aggressively pursuing growth at any cost. The exception is the company that demonstrates solid growth and articulates confidence and a clear plan for continued growth.
- Sector spotlights
Retail & Consumer: Investors want to see how companies have managed promotional activity, inventory levels, and margin protection. High revenue with lower gross margins is generally frowned upon. And with consumers under pressure, signs of customer retention and digital engagement will be helpful.
- Consumers are managing rising costs by being more discerning and recalibrating spending:
- Trading down in food & liquor:
- Shift to private label, online, and alternate channels (e.g., Bunnings for food).
- Liquor: Lower price per unit and reduced category participation.
- Categories showing discretionary spending traits.
- Shifting to in-home consumption over dining out, though later and less than expected.
- Trading down in apparel and general merchandise.
- Reducing big-ticket item purchases, impacting retailers like Harvey Norman (ASX:HVN) and The Good Guys (ASX:TGG).
- Trading down in food & liquor:
JB Hi-Fi (ASX:JBH): JB Hi-Fi delivered a strong first half FY25 with circa 9.8 per cent sales growth and eight per cent profit growth, outperforming consensus, yet its share price slipped 16 per cent in February and March – perhaps highlighting how premium valuations might produce amplified investor scrutiny.
With its share price now at all-time highs, expect investors to dissect margin sustainability amid promotional intensity, and whether the group’s strong brand and cost control can continue to drive profitability, particularly in its appliances segment. Any decline in average transaction size or like-for-like sales could raise concerns.
In the March 2025 quarter, comparable sales rose six per cent in Australia and 7.5 per cent in New Zealand, reinforcing momentum.
Wesfarmers (ASX:WES): With its diversified portfolio across Bunnings, Kmart, and Officeworks, investors will assess how each division is holding up under a slowing consumer. Bunnings’ performance in the Trade and Do It Yourself (DIY) segments will be especially telling.
Super Retail Group (ASX:SUL): Margins and customer retention in Rebel, BCF, and Supercheap Auto will be closely watched, particularly in the context of inventory clearance efforts and shifting discretionary spend patterns.
Banks: Credit quality and net interest margin (NIM) trends are front and centre, particularly in light of rising delinquencies and loan book stress in parts of the Small to Medium Enterprise (SME) (property developer, cafes and restaurants) and mortgage market.
Commonwealth Bank (ASX:CBA) remains a bellwether. Its CET1 capital rose to 11.9 per cent pre-dividend, with a $3.8 billion payout in the first half of the financial year (H1) – a signal of capital strength amid profit growth of circa four per cent year-on-year (YoY) in net interest income
Resources: Softening demand from China and flat to falling commodity prices are forcing a renewed focus on cost control, capital returns, and project discipline.
Technology: Unlike our U.S. brethren, it seems Australian investors demand to see a path to profitability. Cash burn without clear evidence of operating leverage or falling churn rates aren’t acceptable.
Navigating macro, regulatory, and geopolitical noise
Finally, companies will be expected to speak more directly to the external risks they face, including geopolitical tensions, especially those impacting trade and supply chains, domestic regulatory risks in sectors like healthcare, education, and gaming, and any foreign exchange volatility and inflation pass-throughs.
This reporting season could reveal which companies have genuine operating momentum and which have been coasting. For investors, this is a time to pay close attention not just to numbers, but to nuance. The companies that emerge from this reporting season with resilient share prices will probably be those that pair transparent reporting with demonstrated growth and credible outlooks.
The Montgomery Fund, Montgomery [Private] Fund, and the Australian Eagle Equities Fund own shares in Wesfarmers, and Commonwealth Bank of Australia. The Montgomery Small Companies Fund own shares in Harvey Norman. This article was prepared 5 August 2025 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade these companies, you should seek financial advice.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
He is also author of best-selling investment guide-book for the stock market, Value.able – how to value the best stocks and buy them for less than they are worth.
Roger appears regularly on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
