It has been a rough few months for JB HI-FI with earnings downgrades, questions from ASX and steady competition from online operators.
JB HI-FI Group has reported strong results despite the intense competition in the market and threats from the likes of Amazon and Kogan. Its total sales were up 21.8 percent to $6.9 million and earnings before interest and tax were up 14.5 percent to $350.6 million. The Group’s net profit was $233.2 million, up 12.3 percent (from $207.7 million in FY 2017).
In May this year JB HI-FI downgraded the company’s projected results by three percent to $230.06 million from an earlier projection of $235 to $240 million. After the announcement, share prices dropped by 9.8 percent to $23.06. JB HI-FI found itself in hot water after at that time for including the earnings downgrade as part of an overall presentation that was titled around quarterly earnings rather than a separate market sensitive announcement.
“We are pleased to have delivered another year of record sales and earnings in FY18,” said Group CEO, Richard Murray. “It was another strong result for the JB HI-FI business in Australia…Whilst it was a challenging second half for the The Good Guys business, we made strong progress towards our key initiatives as we position the business for future growth.”
For JB HI-FI Australia, total sales grew 9.4 percent to $4.54 billion with comparable sales up 6.2 percent. Online sales grew 32.1 percent to $209.9 million (being 4.6 percent of total sales). The online offering continues to improve and given these results and the growing competition, no doubt online retailing will be a huge focus of JB’s strategy for future growth. Key growth categories were communication, computers, audio, games hardware and drones.
Gross profit increased by 9.1 percent to $1 billion resulting in a gross margin of 22.2 percent. Total operating costs remained well controlled as the business managed increased volumes through the store network driven by new products, Click and Collect, online and commercial order fulfilment. It is in this area that JB Hi-Fi says is has its competitive advantage and will continue to focus on productivity and minimising unnecessary expenditure.
In comparison, for JB HI-FI New Zealand, total sales were down 1.1 percent to NZD$231.5 million. Again showing strong growth in e-commerce following the launch of the new website in August 2017, online sales in New Zealand grew 96.3 percent to NZD$9.6 million or 4.1 percent of total sales. The Group is continuing to reposition itself through rebranding and closures in order to improve performance in NZ.
The JB HI-FI Group acquired white goods retailer The Good Guys in November 2016 for $870 million. As a result of full year ownership in the 2018 financial year, sales were up 67 percent. Comparatively speaking, total sales were up 1.5 percent year on year since the acquisition with comparable sales up 0.9 percent. Online sales for the period were up 7.4 percent to $126.8 million or 6 percent of total sales.
“We continued to take a considered and deliberate approach to change at The Good Guys,” Murray explained. “Despite the challenging conditions in the Home Appliances market in the second half, we remained focused on sales and market share. Having owned The Good Guys for over 18 months we are now starting to realise the benefits of the scale of the combined group and remain excited by the opportunity to grow one of Australia’s leading retail brands.” Just this month Kogan launched its own whitegoods range, putting it in direct competition with The Good Guys.
For the next financial year, JB HI-FI expects to open give stores in Australia, open two Good Guys stores and close one JB HI-FI store in New Zealand. Total Group sales are expected to be around $7.1 billion (including $4.75billion for JB HI-FI Australia, NZD$0.22 billion for JB HI-FI New Zealand and $2.15billion for The Good Guys).
While these results are strong, industry experts are still wary of the impact of marketplaces such as Amazon, eBay, Catch and Kogan and their ongoing expansion that directly threatens JB HI-FI and The Good Guys’ market share. “We are clear on our objectives for the next 12 months and are excited in the outlook for the business,” concluded Murray.