A nearly 25% reduction in the size of its final dividend revealed the true story behind JB Hi-Fi's (ASX:JBH) annual results released on Monday, shedding light on the challenges Australia's largest home entertainment retailer faces.
While some reports focused on the company's claim of increased market share for the year ending in June, the significant slowdown in sales growth and earnings during the second half, coupled with the dividend cut, suggests that the company's board is preparing for a challenging fiscal year 2023-24.
Despite revenue rising by 4.3% to $9.6 billion in the 2022-23 financial year, it's notable that by the halfway point on December 31, revenue growth was twice as high at 8.6%. Earnings experienced a 3.7% decline, amounting to $524.6 million for the full year, although they had surged by 14.6% by December 31. This indicates that the company was compelled to sacrifice profit margins by reducing prices in the latter months of the financial year, as consumers in Australia and New Zealand tightened their spending.
The final dividend took a substantial hit, plunging by 24.8% to 115 cents per share from the previous year's 153 cents. As a result, the total dividend for the year stood at 312 cents per share, a slight decrease from the $316 in 2021-22. However, it's important to note that this decrease was offset by the hefty 197 cents per share interim dividend paid in February.
Terry Smart, Group CEO, remarked in Monday's release, "We are pleased to report record sales and earnings per share for FY23. In a challenging retail environment, we remained top of mind for shoppers and grew our market share by continuing to drive our value offering, leveraging the strength of our multichannel offer, and maintaining our high levels of customer service."
Breaking down the business segments, JB Hi-Fi Australia witnessed a 5.6% rise in sales to $6.55 billion, while comparable sales increased by 4.8% (both figures trailing behind the 6% inflation rate for the year ending in June). The key retail profit measure, EBIT, increased by 1.3% to $551.9 million, yet the EBIT margin decreased by 36 basis points to 8.4%.
JB Hi-Fi NZ reported a total sales increase of 11.3% to NZD 292.1 million, with comparable sales also up by 11.3%. However, EBIT experienced a sharp decline of 49.9% to NZD 4.4 million, causing the EBIT margin to drop by 185 basis points to 1.5%. Excluding the impact of impairments, underlying EBIT was negative NZD 2.2 million, down NZD 6.9 million.
The Good Guys, primarily a whitegoods retailer, observed a meager 0.8% rise in sales to $2.81 billion, with comparable sales edging up by the same percentage (again falling short of inflation). Nonetheless, EBIT decreased by 11.8% to $213.0 million, resulting in an EBIT margin decline of 108 basis points to 7.6%.
In a potential warning sign for the upcoming December half, JB Hi-Fi noted a weak performance in July of this year. Total sales for JB Hi-Fi Australia fell by 1.8%, with comparable sales dropping by 2.9%. Meanwhile, total sales for The Good Guys experienced a significant 12.0% decline, mirrored by a corresponding drop in comparable sales growth. JB Hi-Fi New Zealand bucked the trend with total sales growth of 10.0% and comparable sales growth of 10.0%, largely attributed to extended Covid restrictions in Auckland throughout 2022.
