JB Hi-Fi gets holiday boost, NZ venture rebounding

JB HI-FI Electrical appliances shop AustraliaElectronics retailer, JB Hi-Fi Group, has unveiled double-digit increases in earnings, profit and sales for the six-months ended December 31, driven by a strong result over the holidays that has buoyed its full-year expectations.

JB’s net profit after tax (NPAT) increased by 21 per cent to $151.7 million in the first-half on the back of a 24.9 per cent increase in earnings before interest and tax (EBIT) over HY17 to $225.8 million.

Total sales increased by 41 per cent over the prior corresponding period (PCP) to $3.7 billion, driven by the acquisition of The Good Guys in November 16 and strong growth JB Australia’s solutions business.

The Good Guys booked a 2.4 per cent increase in total sales to $1.1 billion, while comparable sales increased by 1.8 per cent on strong performance from seasonal products, as well as other key lines such as cooking, visual and dishwashers.

But while JB Australia continued its momentum in the New Year, recording a 4.5 per cent increase in comparable sales in January, The Good Guys’ comparable sales slid by 4.7 per cent in the first month of the year, due to cycling sales of seasonal air conditioning products in the PCP.

Slower sales at The Good Guys were a focus for analysts in a subsequent earnings call on Monday morning, while shareholders sent the retailer’s share price down over 7.5 per cent to $25.98 by midday.

The company updated its guidance on Monday morning to reflect the half-year result, advising that it expects group sales of around $6.85 billion and group NPAT to be between $235 million and $240 million, an increase of 13.1 per cent on FY17.

Commenting on the result, group CEO Richard Murray said he was pleased with JB’s performance over the holidays and is confident in the progress made by The Good Guys, post-acquisition.

“We are pleased to have delivered record sales and earnings in the first half. It was another strong result for the JB Hi-Fi business in Australia, particularly through the important November and December periods. We are pleased with the progress we have made at The Good Guys and are confident about the future opportunities for the Group,” Murray said.

“It was pleasing to see sales growth in The Good Guys throughout the half whilst we continued to take a considered and deliberate approach to change…we are now starting to realise the benefits of the scale of the combined group.”

JB Australia’s cost-of-doing business decreased by 17 basis points on the PCP to 13.8 per cent, helping to drive a gross margin of 22 per cent on a 9.8 per cent increase in gross profit to $545.3 million, although gross margin slipped by 2.2 per cent.

The electronics retailer said operating costs were managed amid increasing volumes on the introduction of new products, as well as the growth of click-and-collect and online fulfilment.

JB Hi-Fi opened seven stores in Australia in the first-half, closing one store in New Zealand, while two new Good Guys stores were opened.

New Zealand rebounding

While total sales from JB’s struggling NZ business declined .4 per cent to NZ$124.6 million, the result was driven by store closures and comparable sales for the half increased by 2.4 per cent.

JB said its efforts to turn around the business progressed, with one store closed and whitegoods exited across the pond (costing NZ$0.4 million), resulting in four JB Home stores being rebranded to JB Hi-Fi.

A new website was launched, which saw JB NZ’s online sales skyrocket by 89.8 per cent, now coming to 3.8 per cent of total sales.

Hianyang Chan, senior research analyst at Euromonitor International said JB Hi-Fi’s ongoing strong growth highlights its ability to withstand competitor pressure and continued relevance in the consumer electronics retail market.

“The company’s consistent growth in internet retailing shows not only a shift in consumers’ acceptance towards online shopping, but also the company’s commitment to stay up to date by investing and improving their online services,” he said.

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