Confession Number 4 for the day came from JB Hi-Fi.
In fact it is an unsurprising early member of the Confession Season club (on the downside).
Electronics and whitegoods retailer, JB Hi-Fi which is probably one of the most wondered about retailers so far as sales growth is concerned, and the performance of its most recent buy, The Good Guys.
Some investors wonder if there will be a slowdown in the strong sales and earnings performance of recent years. Well, that could have arrived on Wednesday.
Yesterday the shares fell more than 9% to a five month low of $23.06 after JB Hi-Fi owned up to slowing sales growth which would knock $10 million or so off its expected after tax net profit. The shares down nearly 9% at $23.28.
The company blamed bad weather in a presentation to the Macquarie investment conference in Sydney (where Amcor’s update was also revealed). JB Hi-Fi reaffirmed ts forecast for top line sales for the year of around $6.85 billion.
Sales growth in the core JB Hi-Fi business is still solid, but it has come off the much stronger pace of a year ago.
March quarter sales growth in its JB Hi-Fi division was at 6.8%, down from 10.8% the same time last year, with a comparable sales growth of 4% (8.2% last year. That is a big slowing).
March quarter sales growth for The Good Guys slowed much more noticeably to a fall of was 1.3%, down from 2.6% at the same time last year, with a comparable sales growth down 2.9% from 1.2% growth in the first quarter of 2017. That is a large 4.1% turnaround.
And that was confirmed by the commentary yesterday. The company blamed the sales slide on weakness in the home appliance market. This has been caused by unfavourable weather conditions and heightened price competition. So to move unsold stock, the Good Guys has had to cut prices prices at the expense of gross margin.
Perhaps the likes of Kogan and Harvey Norman are proving to be tougher competitors than previously thought.
The company has downgraded expected group after tax profit to $230 million, down from the range of $235-240 million.
“Whilst the challenging conditions in the home appliance market are expected to impact performance in the short term, we remain confident in the group model and the medium- and long-term outlook for The Good Guys and JB Hi-Fi,” the company said in the presentation.
