Updates On Four Consumer Discretionary Stocks: JBH, LOV, SUL, HVN

A Look at Retail & Consumer Discretionary Space: Black Friday Special

Consumer discretionary are those goods and services that are non-essential; however, consumers desire them when they have enough income in hand. Consumer buying behaviour has a major impact on the economy. Economic conditions of a country get influenced by the performance of consumer discretionary stocks, as there is a direct relationship between customer income level and demand for these goods and services (consumer discretionary). Non-essential goods and services like premium smartphones, internet services, laptops, computers and speakers are some of the few examples of this category.

JB Hi-Fi Limited 

JB Hi-Fi Limited (ASX: JBH), headquartered in Australia, is a retailer of home consumer products. The company is involved in the sale of consumer electronic products including computers and televisions, in addition to software, white goods and small appliances. JBH caters to clients in New Zealand and Australia. JBH is scheduled to conduct its 2019 annual general meeting at the Computershare Conference Centre, Yarra Falls, Victoria, on 24 October 2019. 

On 3 September 2019, JBH announced that Ausbil Investment Management Limited ceased to be a substantial holder in the company. Additionally, on 2 September 2019, the company had unveiled regarding Mitsubishi UFJ Financial Group, Inc. ceasing to a substantial holder in JBH.

 

Financial Summary for FY2019

 

  • Total sales for the year grew by 3.5% year-on-year to AUD 7,095.3 million, compared with AUD 6,854.3 million recorded in the same period a year ago.
  • Earnings before interest and tax reached AUD 8 million in FY19, up 6.4% from AUD 350.6 million in FY18.
  • For FY19, net profit after tax grew by 7.1% to AUD 249.8 million on prior corresponding period.
  • JB HI-FI Australia registered a 4.1% increase in total sales to AUD 4.73 billion, while JB HI-FI New Zealand posted a 2.0% rise in total sales to NZD236.2 million and The Good Guys witnessed a rise of 2.2% in total sales to AUD 2.15 billion during FY19.
  • At the end of the reported year, the company had cash balance of AUD 119.2 million. 

FY19 Highlights (Source: Company’s Report)

 FY20 Outlook 

The company is expecting to register AUD 7.25 billion in total group sales during FY20, including AUD 4.84 billion from JB HI-FI Australia, NZD 0.24 billion from JB HI-FI New Zealand and AUD 2.18 billion from The Good Guys.

Stock Performance

On 4 September 2019, the JBH stock closed the day’s trading at AUD 32.770, up 1.111% from its previous closing price. It has a market capitalisation of AUD 3.72 billion and approximately 114.88 million outstanding shares. In the last three months and six months, the stock has delivered 16.50% and 45.40%, respectively.

Lovisa Holdings Limited 

Lovisa Holdings Limited (ASX: LOV) is engaged in the retail sales of accessories and fashion jewellery. The company operates in countries including Australia, New Zealand, Malaysia, Singapore, United Kingdom and South Africa. The company, which opened its first store in April 2010, owns and operates over 300 retail stores. On 30 August 2019, the company announced that its annual general meeting would be held on 29 October 2019.

Financial Performance during FY2019 

On 22 August 2019, the company announced its FY2019 financial results. Below are some of the major points covered in the results.

  • EBIT increased by 2.8% to AUD 52.5 million compared to the previous corresponding year.
  • Gross margin increased 50 bps to 80.5%.
  • Revenue increased by 15.3%, while store sales were down by 0.5%
  • Depreciation increased 38% due to more capex on the rollout of new stores
  • The company continues with strong balance sheet and cash flow generation 

The management also unveiled to pay a fully franked final dividend of 15 cents, representing an increase of 1 cent on the pcp.

FY19 Highlights (Source: Company’s Report) 

During the financial year 2020, the company expects its retail store network to grow further.

Stock Performance

On 4 September 2019, the LOV stock closed the day’s trading at a price of AUD 12.420, down 1.272% from its previous closing price. Lovisa Holdings Limited has a market capitalisation of AUD 1.33 billion and approximately 105.77 million outstanding shares. The stock has delivered returns of 14.65% and 22.85% in the last three months and six months, respectively.

Super Retail Group Limited 

Super Retail Group Limited (ASX: SUL), headquartered in Brisbane, is a major player in the retail industry in Australia. The company retails products including auto parts, accessories, tools, outdoor equipment, in addition to apparel and sports equipment. SUL, which caters to customers in Australia, China and New Zealand, is counted amongst the top 10 retailers in its homeland.

Financial Performance during FY2019 

On 15 August 2019, the company declared its FY2019 results. Below are the key updates.

  • Total sales grew by 5.4% to AUD 2.71 billion compared to the previous corresponding year.
  • Total segmental EBITDA increased by 7% to AUD 314.7 million
  • Segmental depreciation and amortisation went up by 16.2% to AUD 86.6 million
  • Total segmental EBIT increased by 3.9% to AUD 228.1 million
  • The company continues to have a strong cash generation and lower net debt
  • All segments of the company delivered positive like for like sales growth
  • The management of the company declared a fully franked dividend of 28.5 cents per share, bringing the full-year dividend to 50.0 cents per share

Source: Company’s Report

Segmental Snapshot

Supercheap Auto reported a 3.4% increase in sales to AUD 1.05 billion. Also, it witnessed like for like sales growth in all Australian states and New Zealand. This segmental EBITDA grew by 5.3% to AUD 156.1 million and EBITDA margin also improved by 0.3% compared to the previous year.

Rebel – The segment’s total sales increased by 3.8% to AUD 1.02 billion. Like to like sales growth surged by 3.3%, on the back of transaction growth and higher average transaction value. The segmental EBITDA increased to AUD 122.6 million, highlighting an increase of 6% from the previous year.

BCF – Sales growth for this segment was reported by 3.3% to AUD 514.6 million, owing to increased units per sale. The segment performance reflects significant investment in price to maintain a leading position in the market. The segmental EBITDA dipped to AUD 40.2 million.

Macpac – Sales for this segment stood at AUD 119.3 million, aided by new stores and reflecting a 7.3% like for like growth. The segment also included the 3-month contribution from Adventure Hubs. The segmental EBITDA reached AUD 17.45 million.

Source: Company’s Report

Stock Performance

On 4 September 2019, the SUL stock settled at AUD 9.340, up by 1.854% from the previous close with a market capitalisation of AUD 1.81 billion and approximately 197.38 million outstanding shares. In the last six months, the stock delivered returns of 24.93%.

Harvey Norman Holdings Limited

Harvey Norman Holdings Limited (ASX: HVN), is an ASX-listed company, which is primarily involved in property, integrated retail, franchise and digital enterprise activities. The company operates under the franchise system in Australia under three brands, namely, Harvey Norman®, Joyce Mayne® and Domayne®. The company sells products in several categories such as electrical goods, furniture, bedding, flooring and computerised communications.

On 3 September 2019, the company announced a change in the director (Key Lesley Page) interest. The number of securities held by the director prior to change was 8,897,895 fully paid ordinary shares, 225,000 performance rights and 183,000 FY19 performance rights (direct interest). The director now holds 8,897,985 fully paid ordinary shares, 225,000 performance rights and 183,000 FY19 performance rights (direct interest). Under the indirect interest category, the director acquired 5,442 fully paid ordinary shares for a consideration of AUD 24,053.64.

Financial Performance during FY2019
  • The company reported PBT of AUD 574.56 million, up 8.4% from the same period of previous year
  • Net asset value exceeded by 8.8 percent to AUD 3.20 billion for FY2019 (period ended 30 June 2019)
  • Offshore company-operated Harvey Norman® retail sales revenue stood at AUD 2.01 billion, while aggregated headline franchisee sales revenue was AUD 5.66 billion.
  • Property portfolio was valued at AUD 2.99 billion as at 30 June 2019.

FY19 Highlights (Source: Company’s Report)

The management declared a dividend of AUD 0.21, scheduled for payment on 1 November 2019. The dividend has a record date of 11 October 2019 and ex-date of 10 October 2019.

Stock Performance

On 4 September 2019, the HVN stock closed the day’s trading at AUD 4.400, with a market capitalisation of AUD 5.19 billion and approximately 1.18 billion outstanding shares. The stock has delivered 8.64% and 15.79% in the last three months and six months, respectively.


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