For the second time in a week electronics retailer JB Hi-Fi has maintained its guidance for fiscal 2009 sales to grow by 28%, despite a "challenging" retail environment that the company expects will lead to further industry rationalisation.
The company repeated comments made last week in the wake of the surprise lower profit report from rival, Harvey Norman for its first two months of 2009 trading.
Harvey Norman was pulled down mainly by the rising tide of losses from its chain in the tanking Irish market. HVN said it doesn’t see any quick improvement in Ireland.
JB Hi-Fi responded to questions about how it was placed in the wake of the HVN announcement and at yesterday’s AGM in Melbourne, CEO Richard Uechtritz told shareholders that trading in the first quarter of the new fiscal year had been "solid" and the company was still forecasting sales to rise to $2.35 billion from fiscal 2008.
"Despite the current economic and retail environment and with the all important Christmas trading period ahead of us, the company remains confident that it will meet market expectations," Mr Uechtritz said.
"As previously advised to the market, trading in the first quarter has been solid and we maintain our previous sales guidance for fiscal 2009 of circa $2.35 billion or a 28% increase on fiscal 2008."
Chairman Patrick Elliot said the current retail trading environment was "unique" and said that every company in the sector was under scrutiny.
"So far, our retail proposition has proven to be valued by customers," he told shareholders.
"Low levels of unemployment, falling interest rates and the possible switch from other big ticket purchases may continue to support a reasonable level of consumer spending in our major categories," he said.
"We expect however that these more challenging times in retail will prove a catalyst for further industry rationalisation, increased market share for the company and further enhancement of our competitive advantage."
JB Hi Fi booked a 61.2% lift in net profit after tax to $65.09 million to June 30, 2008.
Sales for the first quarter were on budget and earnings for July and August 2008 were ahead of budget, as margins remain solid combined with good cost control, the company said on October 7.
Both sales and earnings are well up on the previous year, but the company has yet to finalise its September result, the company repeated.
All 6 stores opened so far this financial year are trading well, it added.
After opening 20 new stores during 2007/08, the company will open another 14 new stores for the six months to Christmas 2009, taking its total store franchise network to 119 stores.
JB Hi Fi is confident the recently opened stores will contribute strongly to earnings over the coming years as they mature and Mr Uechtritz said "The property pipeline remains solid with approximately ten additional stores to be opened in the second half of FY09".
JB Hi Fi rolled out of 20 new stores and added to the expansion in the New Zealand market, opening an additional four JB Hi-Fi stores
Revenue in 2008 rose 43% to $1.8 billion (that will slow to 28% this year, if guidance is met).
There was no mention of the impact of the lower Australian dollar in margins or sales and that is the big imponderable for JBH given that most of its products are imported from suppliers in China and other parts of Asia. The Australian dollar is off around 28USc from its recent peak in July of just over 98 USc.
JB Hi-Fi shares traded up to $11.80 in yesterday’s second strong day of trading. They eased to close up 25c at $11.
In a separate statement Harvey Norman revealed that sales at its Australian stores had fallen in a hole in the last half of September and the first 12 days of October.
Sales in the four week to October 12, that’s last Sunday, fell 4.7% on a like-for-like basis, putting further pressure on margins.
The company said sales in the three months to September 30 increased by 3% on a topline basis, from the same period in the previous year.
Sales totalled $1.44 billion from franchised Harvey Norman stores, commercial divisions and outlets in Australia, New Zealand, Slovenia, and Ireland.
(Singapore sales were again excluded from the figure).
The company said like-for-like delivered sales increased by 1.3% in the quarter compared to the corresponding period last year.
That’s a big drop from the figures for the first two months released on September 30. Then HVN directors said topline sales had grown by 6.9% and by 5% on a like for like basis.
But like-for-like written sales for the 28 days ended October 12 from franchised Harvey Norman stores in Australia fell by 4.7%.
"Retail margins continue to be under pressure," the company said in a statement.
That means sales in September, and especially the closing couple of weeks tanked, as we can see from the statement.
Harvey Norman is the first major Australian company to reveal any sort of impact from the worsening in the credit crunch and the intensified stockmarket slump from mid-September onwards
Harvey Norman said it will report like-for-like written sales for the previous 28 days from its franchised stores in Australia for each of the next four weeks.
"By doing this, the company hopes to give guidance as to what is really happening out in the retail market," it said.
"There are Harvey Norman franchised stores in every state and town of any significance in Australia.
"Sales turnover for the franchised Harvey Norman stores in Australia is indicative of retail market conditions in Australia."
There was no mention of what had happened to sales at JB Hi Fi stores in the past week at that company’s AGM yesterday.
