JB Hi-Fi (JBH) escaped a first half interim earnings report with little scarring from investors, thanks to an accommodating lift in interim dividend.
Normally a small profit fall and forecasts for a flat profit for the full year would have been enough to send the shares lower – look at what happened to Kathmandu (KMD) yesterday when the shares plunged more than 20% on an earnings downgrade of quite sizeable proportions.
But JB HiF-Fi managed to get away with reporting a 1.9% dip in net profit to $88.5 million and a forecast for sales of $3.6 billion for the year and net earnings of $127 million to $131 million – against the $128 million earned in 2010-14.
Also helping was a surprisingly strong upturn in sales in January – that probably helped more than the 4c a share lift in interim payout to 59c a share.
After reporting that first half sales edged up 1.3% to $1.965 billion, the company said January sales surged 8.9%.
And the all important same store sales grew 7% in January alone, after easing 0.7% in the December-half.
The shares rose 1.8% to $17.05.
JBH 1Y – JB Hi-Fi forecasts flat profit
That was enough to give JB Hi-Fi taking comparable store sales growth for the year-to-the end of January of 0.2%, a sharp improvement, which would have also been comforting to investors.
Gross margins rose 11 basis points, but costs rose at a faster rate, holding back earnings growth.
The company’s all important cost of doing business rose 29 basis points to 14.17%.
As a result, earnings before interest and tax eased 2.2% to $130 million (down 9.1% in New Zealand) and EBIT margins fell 24 points to 6.61%.
Analysts said that suggests the company is having to cut margin to allow it to discount prices to match the likes of Dick Smith and smaller rival chains. As well, the fall in the dollar would be adding pressure to margins in a very competitive marketplace.
JB Hi-Fi said hardware and services sales rose 4.7% in Australia in the first half, driven by telecommunications, fitness, hardware and appliances, but sales of software such as DVDs and games fell 10.8%.
New Zealand sales fell 4.3% in the first half as the country cycled the digital switchover a year ago.
The reported net profit was just under market forecasts of around $90.5 million, but the positive start to the second half helped lessen concerns.
