Breville Group (ASX:BRG) delivered record FY26 Revenue while second-half gross margins recovered as its Manufacturing Diversification program progressed. Reported sales increased despite currency headwinds, while EBIT and net profit recorded more measured growth. With most 120-volt product Gross Profit now sourced outside China, the group enters FY27 with a more diversified manufacturing base, although tariffs, currencies and consumer Demand remain important variables.

Record Revenue Supports FY26 Growth

Breville reported FY26 revenue of A$1,810.9 million, up 6.7% from A$1,696.6 million in FY25.

On a constant-currency basis, Global Product revenue increased 9.7%, highlighting the effect of weaker US dollar and euro exchange rates on reported growth.

Gross profit increased 5.0% to A$651.4 million, while EBITDA rose 4.5% to A$284.1 million.

EBIT increased 1.2% to A$207.0 million and was in line with the guidance provided at the half-year result.

Net profit after tax increased 1.7% to A$138.1 million, while Basic Earnings Per Share rose to 95.5 cents.

Second-Half Margin Recovery Marks a Shift

Breville’s full-year gross margin declined to 36.0% from 36.6% in FY25, reflecting Tariff costs and expenses associated with accelerating manufacturing diversification.

However, the trend improved materially during the second half.

Gross margin increased from 35.4% in H1 FY26 to 36.8% in H2 FY26. The second-half result also exceeded the comparable H2 FY25 margin.

Breville attributed much of this recovery to changes in its US sourcing mix as new manufacturing locations increased production volumes.

Manufacturing Diversification Reduces China Exposure

Breville substantially completed its accelerated manufacturing diversification program during FY26.

Approximately 85% of gross profit dollars generated by 120-volt products were sourced from products manufactured outside China by year-end.

These products are mainly sold in North America, where tariff exposure has become a more significant operating consideration.

The diversified manufacturing network gives Breville greater flexibility across locations including Southeast Asia, Mexico and Europe, although changes in tariffs, freight costs and input prices can still affect margins.

Newer Markets Record Rapid Expansion

Breville continued expanding directly into newer international markets during FY26.

China, Korea, Mexico and the Middle East collectively recorded revenue growth of more than 70%.

Coffee and Cooking both achieved double-digit revenue growth during the year, while Food Preparation delivered single-digit growth.

Global Product revenue increased 7.4% on a reported basis to A$1,611.8 million, with stronger constant-currency growth of 9.7%.

Expansion into newer markets increases Breville’s geographic diversification but also requires ongoing spending on teams, marketing, distribution and customer support.

Investment Continues Despite Margin Pressures

Breville continued increasing expenditure on longer-term growth initiatives during FY26.

Investment in product and solutions development, technology services and Marketing increased to 14.4% of revenue from 14.2% in FY25.

Around A$25.8 million of incremental operating expenditure was directed toward supporting new markets and other growth initiatives.

These investments limited near-term EBIT growth despite the higher revenue base, but are intended to support product development, geographic expansion and operating efficiencies over subsequent periods.

Balance Sheet Strengthens Further

Breville ended FY26 with net cash of A$104.4 million, up from A$48.5 million at the end of FY25.

The stronger cash position reflected underlying operating cash generation despite continued Investment in inventory, manufacturing changes and Business expansion.

The company also had substantial undrawn financing capacity at year-end, providing additional financial flexibility.

Breville declared a fully franked final Dividend of 19.0 cents per share, taking total FY26 dividends to 38.0 cents per share, up 2.7% from FY25.

FY27 Outlook Remains Linked to Tariffs and Margins

Breville did not provide formal FY27 earnings guidance with its FY26 result and expects to provide guidance with its H1 FY27 result, consistent with its established reporting approach.

The group enters FY27 with a substantially diversified manufacturing footprint and a stronger second-half gross margin exit rate.

However, tariff changes, foreign exchange movements, raw material costs and consumer demand remain key variables.

Further margin improvement will depend partly on whether the benefits from the new sourcing mix can offset these external pressures while Breville continues investing in product development and international expansion.

Key Risks and Areas to Watch

Tariff policy remains an important operating risk because North America represents a major market for Breville’s 120-volt product range.

Currency movements can also materially affect reported revenue and earnings because a large proportion of sales is generated outside Australia.

Premium appliance demand may weaken if household spending conditions deteriorate, while direct expansion into newer markets carries execution and cost risks.

The sustainability of the 36.8% second-half gross margin, continued growth across newer markets and the eventual FY27 guidance will therefore be important indicators of progress.