Despite analysts claiming that JB Hi-Fi (ASX:JBH), the country’s leading consumer electronics retailer, surpassed expectations with its lower result, the near 20% slash to the interim dividend tells a very different story.
Earnings fell to their lowest level since 2019, while the interim dividend was also slashed to 2020 levels.
It’s one thing to do better than the low bar set by eager analysts; it's another to do better than the weak sales performance and lower margins allowed to keep shareholders happy.
The board declared an interim dividend for the half-year of a still tasty $1.58 per share, fully franked and payable on March 8.
This was 39¢ lower than the record interim of $1.97 paid a year ago when sales and earnings bolted higher coming out of the pandemic. It’s also lower than the $1.63 paid in 2022 and $1.80 a share paid in 2021.
The company reported record interim net earnings of just under $330 million for the December 2022 period. On Monday, they revealed they had dropped to $264.3 million, a fall of nearly 20% and less than the $287.9 million reported for the 2022 December half.
It is also lower than the $317.7 million reported for the December 2020 half-year.
JB Hi-Fi said sales fell 2.2% in the half-year to just over $5.16 billion from its Australian and NZ businesses, but margin was sacrificed as the company cut prices, especially ‘on floor’ to keep up sales momentum and clear inventory.
JB Hi-Fi said earnings before interest and tax (EBIT – considered the best profit measure for retailers) fell 19% to $386.7 million for the half-year, bettering gloomy consensus estimates for a 24.2% fall to $363 million.
JBI Fi’s core Australian market saw a 13.7% drop in EBIT to $294.6 million, but at a cost of a 136-point fall in margin to 8.1% (which is why the overall EBIT and that in Australia was better than forecast by analysts).
The extent of the damage to margin was seen from how a 0.7% rise in sales for JB Hi-Fi Australia became a 13.7% slide in EBIT.
The Good Guys saw a 9.9% drop in sales for the half to $1.39 billion, and EBIT fell 30% to $92.5 million as the margin was sliced by 197 points to 6.7%.
A small positive for The Good Guys was that the management saw sales improve as the half-year progressed.
The company had warned in October that the September first-quarter sales were weakening at its Australian electronics stores and down double digits at the white goods retailer The Good Guys.
CEO Terry Smart said on Monday that as expected, the trading environment became more challenging, amid heightened competitive activity and increased discounting.
At JB Hi-Fi Australia, the Black Friday and Boxing Day promotions helped the business hold the sales line.
Key growth categories were mobile phones, games hardware, small appliances, white goods, and services.
Total sales in JB Hi-Fi New Zealand increased 5.1% to $NZ168.7 million, but comparable sales were down 1.2%.
Mr. Smart described the retail environment at the start of the second half as still challenging, with January sales growth for JB Hi-Fi Australia up 2.5%, with comparable sales growth of 1.7%.
JB in New Zealand sales gained 8.2% (the company is revamping its business there while The Good Guys sales saw sales down 2.2% (which is better than the near 10% drop in the December half).
The company said it retained a closing net cash of $488 million at December 31, up from $127.5 million at June 30. That’s the highest ever amount of cash the company has held at the end of a reporting period.
