Margin Pressures Turn Down JB Hi-Fi
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Shares in home electronics and entertainment and whitegoods retailer JB Hi-Fi took a pounding yesterday after the company fell short of market estimates on earnings, profit margins and the outlook for the rest of 2017-18.
JB Hi-Fi lifted first-half profit 37.4% to a record $151.7 million after a solid Christmas sales performance across its expanded store network. Sales revenue for the six months to December 31 jumped 41%to $3.69 billion, reflecting a full first half’s contribution from tje November 2016 acquisition of rival The Good Guys.
The group also revealed a solid rise in interim dividend to a recored 86 cents a share (up 14 cents or 19%), but that wasn’t enough to convince investors that the good outweighed the worrying.
But all that wasn’t enough fr investors who still see the company as road kill for Amazon.
Investors were more concerned with the 20 basis point fall in gross profit margins and its forecast for a full-year profit of between $235 million and $240 million. While that is still a solid 15.5% rise from 2016-17, it was slightly less than forecast by analysts.
The shortfall was only 3% lower than market estimates, but allied with a slow down in sales growth forecast for the rest of the financial year, the market was left underwhelmed and the shares fell to a day’s low of $25.70, a loss of nearly 9%. It ended the day down 8% at $25.86.
Comparable sales at its flagship Australian JB Hi-Fi stores grew 7.8% in the half year, driven by strong trading in phones, computers, audio equipment, drones, and gaming hardware.
But JB Hi-Fi’s same-store sales slowed to a rise of 4.5% (still more than OK) in January, down from 7.2% growth in the January 2017.
The Good Guys had equivalent same-store sales growth of 1.8% in the December half but fell 4.7% in January, which JB Hi-Fi said was impacted by cycling strong sales of seasonal products like air conditioning units.
Chief executive Richard Murray said he was pleased with the performance and flagged an expected full-year profit of between $235 million and $240 million - compared to $172.4 million in 2017.
"It was another strong result for the JB Hi-Fi business in Australia, particularly through the important November and December periods," Mr Murray said.
"We are pleased with the progress we have made at The Good Guys and are confident about the future opportunities for the group."
Seven new JB Hi-Fi stores opened in Australia during the period and one closed in New Zealand, while two new The Good Guys stores were opened. Sales at JB Hi-Fi’s Australian stores grew 10.8 per cent to $2.48 billion - up by 7.8% on a comparable sales basis - driven by growth in communications, computers, audio, drones and games hardware.
Sales dipped 0.4% in New Zealand but rose 2.4% at The Good Guys, which contributed to a full first-half result for the first time. The consumer electronics powerhouse said it had total sales of $3.68 billion in the half-year to December 31, up from $2.6 billion in the same half in 2016 when sales grew 23%.
The company acquired electronics and whitegoods retailer The Good Guys in September 2016 which boosted revenue and earnings for a year. Now it is back to driving organic growth faster than retail sales growth to maintain its growth stock story.
Comparable sales at its flagship Australian JB Hi-Fi stores grew 7.8%, with phones, computers, audio equipment, drones, and gaming hardware driving that growth.
Online sales grew 40% to account for 4.8% of total sales, JB Hi-Fi said.
JB Hi- Fi’s CEO Richard Murray said he was pleased with the record sales and earnings.
“It was another strong result for the JB HI-FI business in Australia, particularly through the important November and December periods," he said.
“We are pleased with the progress we have made at The Good Guys and are confident about the future opportunities for the Group.” Earnings before interest, tax, depreciation and amortisation was $256 million - up from $205 million last year.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.