Consumer entertainment and technology group, JB Hi-Fi is maintaining its forecast 2009 sales growth estimate at 19%, after reporting a 61% rise in full-year profit for 2007-08, thanks to store expansion and booming demand for its products.
That was after sales grew 43% in the year to June
The retailer said net profit for the year to June 30 rose to $65.1 million from $40.4 million a year ago.
That topped forecasts of $64.1 million from some analysts and was above a company forecast of $64 million made in June.
Shareholders will benefit with the company declaring a fully franked final dividend of 16.0 cents per share (compared to 6 cents in 2007) an increase of 10.0 cents or 167%.
The chain, which sells flat screen TVs, computer games, DVDs and CDs, has been insulated from a broader pullback in consumer spending as shoppers continue to buy home entertainment products even as food and petrol prices rise.
Whether that insulation continues is the big question about this company.
Its growth will slow because it is very hard to drive sales growth of 60% year after year as store numbers increase and the company is exposed to more and more of a market or economy.
Part of the problem for JB Hi-Fi is that its two markets: Australia and New Zealand won’t be all that confident this year as consumer confidence and spending slows and growth drops.
But CEO, Richard Uechtritz is confident the company can go on, heading upwards.
"JB has proven to be resilient with home entertainment becoming more of a staple category as consumers keep up with technology,” he said yesterday in a statement to the ASX.
“We continue to grow our market share as recently opened stores mature, we open new stores, expand our offering and reduce our prices on the back of increased economies of scale and a continued focus on costs.
"We expect to have another strong year of sales and earnings” he said.
The company had had 93 Australian and 12 New Zealand stores at year end and will open 24 new stores in FY09, which will be the largest number it has opened in any year since formation.
"The maturing of the 33 stores opened in the last two years and the 24 new stores will continue to drive solid top and bottom line growth going forward," the CEO said
“Sales for July and August FY09 YTD have been very strong driven by Games, Movies, Computers and Visual. Consolidated comparable store growth for the first 7 weeks of trading in FY09 was 19.2% continuing our impressive comp store growth of the previous year” said Mr Uechtritz.
“As this is only 7 weeks and we have the all important Christmas trading period ahead of us, we maintain our previous sales guidance in FY09 of circa $2.35 billion or 28% increase on FY08.”
Shares in JB Hi-Fi, which competes with Harvey Norman Holdings and Woolworths’ Dick Smith Electronics, have fallen 20% this year, beating a 40% slump for the consumer discretionary sector. Its fall is roughly in line with the 21% drop in the broader market.
It’s shares rose last week on speculation it was a takeover target of Woolworths and yesterday jumped to $12.93 after the results were released, before falling back to close up a mere 1.7%, or 21 cents at $12.59.
Sales revenue rose 42.7% to $1.829 billion of sales from 2007’s $1.282 billion.
"This strong result was achieved after absorbing the cost of a substantial first year of investment in new stores in New Zealand and the rollout of Telecommunications in Australia, which should be positive contributors in FY09," the company said in a statement to the ASX.
"Consolidated comparable store growth was 15.3%. Sales in all product categories were solid; with games, computers, movies and visual driving strong comparable store sales growth, together with the maturing of recently opened stores.
"Gross margin in Australia at 22.2% was the same as last year, despite the growth of newer lower margin categories like games and computers. Consolidated gross margin was 21.9% (2007: 22.1%) reflecting our everyday low prices strategy and investment in New Zealand. Cost of doing business was down at 15.3% (2007: 16.0%) contributing to an increase in EBIT margin to 5.6% (2007: 5.1%).
“We are extremely pleased with this very strong result having traded well during what is considered to be the weakest retail climate for many years” said CEO Richard Uechtritz. “It again shows the strength of our retail model. Whilst the retail outlook is less certain than at previous reporting dates.
