Breville Group (ASX:BRG) reported first-half FY2026 results that management described as “challenging but encouraging,” highlighted by double-digit sales growth, tariff-driven margin pressure that was partially offset through manufacturing and commercial actions, and a stronger net debt position.
First-half results: record revenue, flattish EBIT, higher dividend
Group CFO Martin Nicholas said the company delivered revenue growth of 10.1% in 1H26, citing resilient premium consumer demand supported by continued new product development (NPD/“MPD”) and what he called a “coffee tailwind.” The half produced record sales of AUD 1.1 billion, which Nicholas said represented a doubling of revenue over the past six years.
The board declared a fully franked interim dividend of AUD 0.19, an increase of 5.6% on the prior period paid in March, according to Nicholas.
Tariffs and manufacturing diversification: “heavy lifting” largely complete
Management repeatedly pointed to manufacturing diversification as the biggest tariff mitigant. Nicholas said the company met its target to have 80% of U.S. gross margin manufactured outside of China by December 2025. CEO Jim Clayton said the diversification program began in FY2023 with production of the Barista Express in Mexico, accelerated in FY2025, and achieved its objective by the end of the first half of FY2026.
Clayton emphasized the speed and complexity of the shift and said product quality had been maintained on the new manufacturing lines. He also outlined what comes next: the second half will focus on moving remaining SKUs at a “controlled pace” and beginning a component localization effort intended to optimize long-term production costs. He added that Breville’s NPD team still works directly with manufacturing partners in China on new products and that all 240-volt products remain produced in China, while most 120-volt U.S.-market variants have moved to other locations.
In Q&A, Nicholas said that, all else being equal, the mix shift away from China-produced inventory should create a more favorable tariff mix in 2H26 and into 1H27, while noting other moving variables such as foreign exchange, pricing, and shipping.
Segment and geographic performance: strength in direct markets, distributor “wave” effects
Nicholas said the global product segment increased revenue 10.9% (or 9.3% in constant currency). He highlighted strong consumer response to coffee launches including the Oracle Dual Boiler and Encore ESP Pro, contributing to double-digit coffee growth. Cooking and food preparation posted high single-digit revenue gains.
Breville’s direct markets grew in double digits in constant currency, and Nicholas said newer geographies—Korea, China, Mexico, and the Middle East—grew at over 50%. He noted slower growth in distributor-led geographies, which cycled a strong first half in FY2025. The distribution segment increased gross profit by AUD 2.1 million and was described as fulfilling its “tactical role.”
By region, Nicholas described broad-based underlying strength:
- Americas: total revenue up 11.1% in constant currency, with double-digit coffee growth led by premium launches and strong performance from the Barista Express. The company also installed 300 additional store-in-stores in Best Buy in November.
- APAC: direct markets (Australia, New Zealand, Korea, and China) delivered double-digit constant-currency growth; China was described as “still small” but encouraging, and Korea “continuing to go from strength to strength.” Total theater growth was 6.1%, reflecting weaker distributor-led markets after a strong prior period.
- EMEA: direct markets (UK, EU, Middle East) grew in double digits led by coffee and new products, with strongest growth in the EU and Middle East. The UK delivered “solid single-digit growth” against what management called a challenging macro backdrop. Total theater growth was 7.6%, with distributor markets including Turkey, the Nordics, and Southern Africa more moderate after a strong 1H25.
During Q&A, management pushed back on the idea that distributor softness reflected structural issues, describing distributor ordering patterns as a timing “wave” driven by long lead times and inventory cycles. Clayton said performance should be assessed over longer periods rather than a single half, noting Breville reports revenue on shipments to distributors rather than sell-through.
Investment, cash flow, and balance sheet trends
Nicholas said the company increased investment in growth drivers, including new markets, marketing, and “DNA itself,” partly related to manufacturing diversification. He attributed AUD 12.9 million (about 60% of the operating expense increase) to these areas, while describing other operating cost growth as modest outside of foreign exchange translation.
On cash and leverage, Nicholas said underlying cash generation was strong and net debt improved despite $42 million in U.S. tariff cash payments during the half. Net debt at December 31 improved by more than AUD 11.5 million versus the prior comparative period to AUD 43.6 million. He said the balance sheet remained conservatively geared at 0.2x last-twelve-month EBITDA and that the group had significant cash and unused debt facilities.
Receivables peaked seasonally in December at AUD 515.7 million, up 7.6% year-on-year, with debtor days in line with the prior period. Nicholas said the company returned to a net cash position of AUD 70.1 million as of January 31, 2026, compared with AUD 18.7 million in the prior period.
Inventory was flat year-on-year, with lower U.S. unit holding offset by tariff-driven cost-per-unit increases. Looking ahead, Nicholas and Clayton said the shift to new manufacturing facilities will require an earlier build of 120-volt inventory for the FY27 peak season—starting in March rather than July—resulting in higher planned June inventory balances and associated effects on reported cash levels.
Operational updates: new products, retail execution, and an AI transformation program
Clayton highlighted new products rolling out in FY26, including the Oracle Dual Boiler (which he said won best new product at the World of Coffee in Dubai), the iQ Toaster, and the Encore ESP Pro from Baratza. He also noted Williams Sonoma launched a new mixed metals range in late December, following what he described as a strong performance from the prior year’s brass range.
On go-to-market investments, Clayton discussed a new standalone café in Seoul’s Seongsu area as the next iteration of Breville’s café format, and a store-in-store in El Palacio de Hierro in Mexico City, which he said marked Breville’s entry into that retailer after the company secured agreement to execute store-in-store formats. He also described Best Buy’s decision to consolidate in-store small domestic appliance offerings to a small number of brands, with Breville included as a primary brand executing store-in-store formats.
Clayton also introduced what he called the next phase of Breville’s transformation, centered on AI. He outlined a three-part program—training and enablement, agents and process automation, and AI infrastructure and governance—and said more than 1,000 employees are actively using AI each month. As one example, he said an AI support service for global customer service teams went live in October, reporting early benefits including 40% lower onboarding time, significantly reduced turnover, faster and higher-quality documentation, and fewer interactions to resolve cases.
For the full year, Clayton said that given the magnitude of U.S. tariffs absorbed in FY26, the company expects FY26 EBIT to be a slight uptick over last year, assuming no material changes to the U.S. tariff program.
About Breville Group (ASX:BRG)
Breville Group Limited designs, develops, markets, and distributes small electrical kitchen appliances in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company was formerly known as Housewares International Limited and changed its name to Breville Group Limited in November 2008. Breville Group Limited was founded in 1957 and is headquartered in Alexandria, Australia.
