Company Reports

Breville's fiscal 2026 EBIT rose 1% to AUD 207 million on 7% revenue growth. Constant-currency sales were up 10% globally, with the bulk of growth coming from younger direct markets. Tariffs and manufacturing transition costs weighed on margins, however. Shares fell 4% on Aug. 19.

Breville's premium position in niche European and North American small appliances should continue to bear fruit, with strong earnings growth buoyed by global expansion. The company's coffee machines, in particular, have established significant brand strength, underpinning durable competitive advantages. This brand strength is observable in North America and Europe, where Breville is able to command a substantial price premium over competitors and where retail pricing is routinely 10%-30% higher than in Australia. However, the small kitchen appliance industry remains competitive, and there are few significant long-term barriers to entry, limiting Breville's economic moat to narrow.

Breville's gross margins have taken a hit due to US tariffs on Chinese manufacturing. Gross margins in the first half of fiscal 2026 fell 130 basis points from the year prior to about 35%. The company has been diversifying production to lower-tariff countries like Mexico, Indonesia, and Cambodia.

Breville's premium position in niche European and North American small appliances should continue to bear fruit, with strong earnings growth buoyed by global expansion. The company's coffee machines, in particular, have established significant brand strength, underpinning durable competitive advantages. This brand strength is observable in North America and Europe, where Breville is able to command a substantial price premium over competitors and where retail pricing is routinely 10%-30% higher than in Australia. However, the small kitchen appliance industry remains competitive, and there are few significant long-term barriers to entry, limiting our economic moat rating to narrow.

Breville's premium position in niche European and North American small appliances should continue to bear fruit, with strong earnings growth buoyed by global expansion. The company's coffee machines in particular have established significant brand strength, underpinning durable competitive advantages. This brand strength is observable in North America and Europe, where Breville is able to command a substantial price premium to competitors and where retail pricing is routinely 10%-30% higher than in Australia. However, the small kitchen appliance industry remains competitive, and there are few significant long-term barriers to entry, limiting our economic moat rating to narrow.

Breville reported interim 2026 EBIT of AUD 146 million, about 1% higher than last year. Revenue growth of 10% was offset by margin compression from US tariffs. The company provided full-year EBIT guidance of a slight increase on last year.

Breville is diversifying its manufacturing. Some 80% of US-bound gross profit is now expected to be manufactured outside China by the end of the first half of fiscal 2026.

Breville's premium position in niche European and North American small appliances should continue to bear fruit, with strong earnings growth buoyed by global expansion. The company's coffee machines in particular have established significant brand strength, underpinning durable competitive advantages. This brand strength is particularly prominent in North America and Europe, where Breville is able to command a substantial price premium to competitors and where retail pricing is routinely 10%-30% higher than in Australia. However, the small kitchen appliance industry remains competitive, and there are few significant long-term barriers to entry, limiting our economic moat rating to narrow.

Breville's fiscal 2025 EBIT rose 10% to AUD 205 million. The result is driven by strong growth across the Americas, EMEA, and APAC, which all delivered double-digit constant-currency revenue gains. Management did not quantify the fiscal 2026 tariff impact, deferring details to the first-half result.

Global markets have been rattled by US President Donald Trump's "liberation day" tariffs. Trump has raised tariff rates to levels not seen in a century, which will likely set in motion a cascade of supply-demand side shocks, all acting to weigh on the rate of economic growth.

Breville manufactures 90% of its products in China, and about 45% of its revenue is generated from the United States, making the additional 34% tariff on Chinese-manufactured goods noteworthy. Nevertheless, the company maintained its fiscal 2025 EBIT growth guidance of 5% to 10%.

Breville reported interim 2025 operating earnings of AUD 145 million, up 11% on the prior period. Double-digit growth in the core coffee category across all jurisdictions stood out. Guidance for full-year EBIT growth is 5%-10%.

Breville's premium position in niche European and North American small appliances should continue to bear fruit, with strong earnings growth buoyed by global expansion. The company's coffee machines in particular have established significant brand strength, underpinning durable competitive advantages. This brand strength is particularly prominent in North America and Europe, where Breville is able to command a substantial price premium to competitors and where retail pricing is routinely 10%-30% higher than in Australia. However, the small kitchen appliance industry remains competitive, and there are few significant long-term barriers to entry, limiting our economic moat rating to narrow.

Shares in Breville have performed strongly in calendar 2024, up more than 30%, comfortably outperforming mid-single-digit growth for the Morningstar Australia index. Discretionary spending appears to be rebounding, and Breville's international expansion continues to bear fruit.

Breville's premium position in niche European and North American small appliances should continue to bear fruit, with strong earnings growth buoyed by global expansion. The company’s small electrical appliances have established significant brand strength, underpinning durable competitive advantages. This brand strength is particularly prominent in North America and Europe, where Breville is able to command a substantial price premium to competitors and where retail pricing is routinely 10%-30% higher than in Australia. However, the small kitchen appliance industry remains competitive, and there are few significant long-term barriers to entry, limiting our economic moat rating to narrow.

Breville’s fiscal 2024 EBIT grew 8% to AUD 186 million, marginally above our AUD 185 million forecast. The result was largely driven by key American and European regions lifting revenue 5% and 14%, respectively. This more than offset declines in Asia-Pacific and distribution of 6% and 3%, respectively. We lift our fiscal 2025 EBIT forecast by 1% to AUD 207 million. We make only minor adjustments to our longer-term forecasts with an average EBIT increase of about 1% over the next decade. We lift our fair value estimate to AUD 21 per share from AUD 20, principally due to time value of money in addition to the minor increases to our earnings forecasts.

Shares in Breville are expensive, trading at about a 40% premium to our unchanged AUD 20 fair value estimate. While there are near-term headwinds with weaker consumer spending, the valuation disconnect lies primarily in the outlook for Breville’s longer-term growth. For context, our underlying earnings per share compound annual growth rate forecast of about 11% for the next three years roughly aligns with FactSet consensus estimates.

Breville's premium position in niche European and North American small appliances should continue to bear fruit, with strong earnings growth buoyed by continued global expansion. The company’s range of small electrical appliances has established significant brand strength, underpinning the firm's durable competitive advantages. This brand strength is particularly prominent in North America and Europe, where Breville is able to command a substantial price premium to competitors and where retail pricing is routinely 10% to 30% higher than in Australia. However, the small kitchen appliance industry remains competitive, and there are few significant long-term barriers to entry, limiting our economic moat rating to narrow.

Breville’s revenue growth is slowing. With elevated cost-of-living pressures, discretionary spending is front-of-mind for consumers. Breville’s small kitchen appliances are discretionary products, and a weaker consumer is a key cyclical risk to a firm selling premium-priced products. First-half fiscal 2024 revenue lifted just 2% compared with the previous corresponding period. Nespresso sales in the Americas recovered and revenue from newer, mostly European territories grew 73%—albeit off a low base. This was offset by weaker consumer spending, particularly in Australia, a lack of promotional activity, and the 2023 bankruptcy of major U.S. customer Bed Bath & Beyond.

We make no changes to our AUD 20 fair value estimate for shares in Breville. Breville is a high-quality company, with significant brand equity that underpins its narrow economic moat. The company also has a long runway of growth as it expands into new countries and product categories. But shares screen as expensive at about a 30% premium to our valuation. With elevated cost-of-living pressures, discretionary spending is firmly in the spotlight. Purchases of Breville products are discretionary, a weaker consumer is a key cyclical risk to a firm selling premium-priced products.