JB Hi-Fi might have done reasonably well in the year to June, lifting net profit 12% to $233 million from $207 million a year earlier, but competition, which it says intensified in the June half year looks like hitting its 2018-19 performance.
The 2017-18 result was slightly ahead of revised guidance given in May for NPAT (net profit after tax) of $230 million, which was a downgrade from an earlier guidance of between $235 million to $240 million due to falling weaker earnings at The Good Guys chain, which it bought two years ago.
With the Aussie dollar weaker and projected to remain around the 73 US cents to 75 cents for much of the next year, the company’s profit margins will be under pressure from currency moves as well as possible weaker consumer spending because of low wage growth, a series of state polls and a national election and high levels of household debt.
The company said that guidance for the current financial year was for total sales to reach around $7.1 billion – only $200 million more than the $6.9 billion for the group in the June to June which were up sharply from $5.6 billion in 2016-17 which only had 7 months contribution from The Good Guys takeover in 2016. The 2017-18 figure had a full year contribution, making the rise look better than it actually was.
Sales for the core JB Hi Fi Australia are forecast to be $4.75 billion, against $4.54 billion in the year to June – a rise of just $210 million.
Sales in New Zealand are forecast to be $220 million, down from $231.5 million in the year to June while The Good Guys, which was its big takeover deal back in 2016 is forecast to see sales of $2.15 billion – just $50 million more than the 2017-18 financial year.
The company says it expects to open five JB HI-FI Australia stores, two The Good Guys stores and close one JB HI-FI New Zealand store in this financial year.
It is clear from the results commentary yesterday that the company is looking at a dramatic slowing in sales growth. NZ will be down and The Good Guys $50 million rise forecast could be a rounding error in $2 billion of sales for the year.
The slowdown looks more clear in the Australian core business – top line sales growth in 2017-18 was up 9.4% with comparable sales growth of 6.2%
The board yesterday revealed that sales growth in July had slowed sharply to 2.9% on a top line basis (9.3% a year ago) with comparable sales growth slumping to just 0.3% from 6.5%.
Sales growth at The Good Guys also saw a similar fall – July top growth was 2.7% against 6.8% a year ago and comparable store growth was just 1.4% against 5.7% in July last year.
The situation in NZ mixed – July topline sales growth of minus 2.1% against minus 0.7% a year ago but same store (comparable store) growth of 3.4% up from minus 7.6% a year ago.
Dividend was lifted to $1.32 a share for the year up 14 cents from $1.18 a year ago, a payout rate of 65%, with the final of 46 cents. That was unchanged from 2016-17 and indicates a rise in the level of caution on the company’s board.
The shares ended down 0.4% at $23.37.
