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Consumer electronics retailer, JB Hi-Fi Limited (ASX:JBH) has released half-year results for the period ended 31 December 2019. The company clocked a revenue of $4 billion, growing total sales by 3.9 per cent year on year. It recorded positive comparable sales growth across all three divisions.
Such result may have forced short sellers to cover some of the reported short positions, which were around 12.7 million as of 4 February 2020, according to ASIC.
JBH Business Overview – Iconic Retail Brands
The business operates two iconic Australian retail brands, offering products at low prices with exceptional customer service, backed by passionate, knowledgeable team members. The company provides multi-channel experience to customers with in-store, online and commercial capabilities.
The Good Guys is a home appliances and consumer electronics retailer with a focus on home-making families and Gen X demographics. JB Hi-Fi is a store for young-tech savvy demographics, retailing consumer electronics and technology.
It is believed that the business’ scale, low-cost operating model, quality store locations, supplier partnerships and multi-channel capability provide unique competitive advantages.
The company is the number one player in the Australian market with the opportunity for further consolidation. It has global supplier spread relevance with investments spread across a large base that drive efficiencies.
The company has a low cost of doing business as against its peers due to productive floor space with higher sales per square metre, continued emphasis on productivity and minimising unnecessary expenditure.
Stores of JB Hi-Fi are located in major shopping centres, central business districts, homemaker centres, airports, and high foot traffic and convenient locations. The Good Guys’ stores are housed at leading homemaker centres, destination locations and standalones.
It is said that the business has strong partnerships with all major suppliers locally as well as globally. The company’s store locations and high traffic websites provide the supplier with higher visibility for their products.
Its teams are cognizant about the product specifications and benefits. JB Hi-Fi runs a dual-brand retail approach with the ability to execute strategic initiatives at scale as well as ranging and merchandising ability.
JBH’s integrated, high quality in-store and online offering provides customers with a choice. Its store network provides fast online fulfilment through delivery from the store and click and collect. Online customers get access to after-sales support and services.
Half-Year Review - Record Sales and Earnings
During the half-year period, JBH reported following achievements:
- Implemented Sustainability policy.
- Completed new combined Support Office, enabling the sharing of best practice, while maintaining individual brand DNA
- Established Group IT & HR functions.
- Commenced consolidation of 18 bulky goods DC’s into 7 group home delivery centres with Sydney completed, and Melbourne and Brisbane underway.
- Continued expansion of commercial business product and service offering.
- Contributed over $560k as bushfire relief to communities and wildlife.
JBH delivered total sales of $4 billion. Its net profit after tax for the period was $170.6 million as against $160.1 million in the previous corresponding period. Gross profit for the period was $860.2 million compared to $828 million in the first half of 2019.
Occupancy expenses were down to $149.4 million as compared to $151.4 million in the previous corresponding period. Administration expenses were down to $21.3 million as against $24.6 million in the previous corresponding period. Sales and marketing expenses noted at $395.7 million, up from $379.3 million recorded in the same period a year ago. Finance costs increased to $18.3 million compared to $7.1 million in the previous corresponding period.
JB Hi-Fi Australia - Total Sales Backed by Christmas Quarter
In JB Hi-Fi Australia, total sales grew by 5.1 per cent to $2.72 billion with comparable sales up 4.4 per cent. It recorded a comparable sales growth of 4.8 per cent during the Christmas quarter.
In this segment, hardware and services sales increased by 7.8 per cent with comparable sales growth of 7 per cent, which was driven by categories including communications, audio, computers, visual and accessories.
Software sales, comprising 8.3 per cent of total sales, came down to 18.2 per cent with comparable sales down 17.9 per cent due to prolonged declines in movies and music categories along with a substantial decline in games software.
Share of online sales reached 6.3 per cent of the total sales as against 5.6 per cent in the previous corresponding period, and it grew 18.3 per cent to $170.8 million.
JB Hi-Fi New Zealand - Positive Comparable Sales Growth
In JB Hi-Fi New Zealand, the business recorded sales of NZD 138.8 million with comparable sales up 0.8 per cent. However, the second-quarter sales moderated as a result of strong comparable sales in the second quarter of last year.
Key growth areas were communications, accessories and fitness, and online sales were 7.3 per cent of total sales, recording growth of 22.3 per cent to NZD 9.6 million. Its gross margin was down 16 basis points due to sales mix.
FY 20 Focus (Source: JBH HY Results Presentation)
The Good Guys - EBITDA Growth at 12.2 per cent
The Good Guys sales grew by 1.5 per cent to $1.15 billion with comparable sales growth of 0.6 per cent, and its sales momentum improved with 2.7 per cent comparable sales growth in the second quarter.
Its key segments were dishwashers, floorcare, cooking, communications and computers, and the company is pleased with its performance in the large home appliance category in a challenging market.
Online sales were 6.9 per cent of the total sales as against 6.3 per cent in the previous corresponding period. Its online sales increased by 12.6 per cent to $79.6 million, and there was a decline in sales from the third-party marketplaces.
The segment recorded a gross profit of $237.6 million with gross margin improved by 8 basis points to 20.7 per cent. Its sales growth, gross margin expansion and cost control resulted in a strong EBITDA growth of 12.2 per cent.
Outlook & Dividend
The retailer has announced a fully franked interim dividend of 99 cents per share, indicating growth of 8.8 per cent over the previous corresponding period. It would be paid on 6 March 2020 to the shareholders in records on 21 February 2020.
In FY 20, the group expects total sales of $7.33 billion, involving sales of $4.93 billion from the Australian division, NZ$0.24 billion from the New Zealand division and The Good Guys sales of $2.18 billion.
Total group NPAT, pre AASB 16, is expected to be in the range of $265 to $270 million, indicating an increase of 6.1 to 8.1 per cent increase over the previous corresponding period.
On 10 February 2020, JBH closed the day’s trading at $44.710, up by 11.496 per cent from the previous close.
