If you Google JB Hi-Fi (JBH) you find that a year ago and then around in May of 2013, the company produced earnings updates on the upside.
Yesterday, it did it again as the sell-off on the local market hurried to catch up to two days of trading in the US and Asia.
JBH’s upgrade provided some monetary relief before the doom and gloom selling resumed in the late afternoon and the market closed down 1.3%, or 66 points lower.
Yesterday’s upgrade saw JB Hi-Fi shares post their biggest gains for almost a year, rising 11% at one stage after the company maintained its full year sales guidance and confirmed that December-half net profit was expected to rise 10%.
The shares ended up 4.9% at $19.19 after they hit $20.31 in the early exuberant trading.
Coming after the surprise downgrades by Super Retail Group (SUL) 10 days ago and budget retailer The Reject Shop (TRS) last Friday, the upgrade from JBH put a bit of backbone into the listed retail sector in yesterday’s down day for the wider market.
McPhersons (MCP), which supplies the retail trade, also joined the downgrade club yesterday.
McPherson’s warned that December-half net profit will dip about 2% thanks to higher costs and increased spending on promotions offset strong growth in sales from recent acquisitions.
But the update from JBH CEO Terry Smart helped lighten the mood among retailing investors.
Mr Smart said JB Hi-Fi’s net profit rose to $90.3 million in the six months ended December 31, compared with $82.1 million in the year-earlier period.
He said earnings before interest and tax had risen 7.5% to $132.9 million.
That meant EBIT margins had improved 4 basis points to 6.8% (6.8c in the dollar) and gross margins had risen 11 basis points to 21.6% (or 21.6c in each dollar of sales).
And that was the big takeaway from the JBH upgrade.
Unlike Super Retail, McPhersons and The Reject Shop, which had been forced to cut margins (by spending more on advertising) to drive sales in the half year (and at Christmas), JB Hi Fi has managed to improve its profitability.
Same-store sales rose 2.8% in the six months and topline sales climbed 6.8% to $1.94 billion.
The company will release its full half year earnings report next Monday and the most important bit of news in that statement will be the size of the interim payout to shareholders.
JBH Vs SUL Vs TRS 1Y – JB Hi-Fi Bucks Retail Trend
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