JB Hi-Fi has reported a decline in profits as budget-conscious consumers made more considered choices about their electronics and haggled for better deals, but the figures were better than expected, sending the company’s share price sharply higher on Monday.
The electronic retailer’s half-year net profits of $264.3 million represented a 20 per cent drop compared to the same time last year, while total sales came to $5.2 billion, down from $5.3 billion.
JB Hi-Fi chief executive Terry Smart said it had been a more challenging and competitive trading environment, but he noted that inflation was settling, interest rate rises were slowing and tax cuts appeared to be on their way.
“There’s a lot of positive talk out there, and that may assist us through this next half. But it’s so much crystal balling,” Smart said in a call to investors.
Despite the sales and profit drop, the figures were better than market expectations, sending JB Hi-Fi’s share price more than 6 per cent higher at midday.
The electronics retailer, which also operates in New Zealand and owns The Good Guys chain, saw total sales from its Australian business rise 0.7 per cent to $3.6 billion, benefiting from Black Friday and Boxing Day sales, with mobile phones, gaming hardware, small appliances and whitegoods selling well.
However, gross profit fell 3 per cent and gross margin also declined due to the volume of promotions and discounts given on the floor. The sales team is encouraged to price-match with competitors to make a sale.
“We’re having to match a lot more deals on the floor,” Smart said.
The Good Guys’ total sales slid by nearly 10 per cent to $1.4 billion, but gross margins ticked up slightly to 23.4 per cent – stronger than JB Hi Fi Australia’s 16.7 per cent – in part driven by the take-up of telco connection services offered by The Good Guys.
The company has trimmed its interim dividend by nearly 20 per cent to $1.58 per share fully franked, which will be paid on March 8.
Analysts described trading momentum as better than expected and flagged upgrades of 4-9 per cent to the company’s earnings expectations.
“Another strong, clean result from JB, highlighting in our view the quality of execution,” Jarden analysts wrote in a note issued on Monday morning.
MST Marquee senior research analyst Craig Woolford said he expects the share price to rise, but queried the dividend payout ratio of 65 per cent given the net cash balance of $488 million at the end of the half-year.
“JB Hi-Fi has delivered a solid result under the circumstances of weaker sales and higher operating costs. While the result is decent, there has been some anticipation of a better result,” he said.
So far, the beginning of the second half of the financial year has gone well for JB Hi-Fi, with total sales growth in Australia inching up 2.5 per cent and New Zealand notching 8.2 per cent, but not for Good Guys, which saw sales growth slide 2.2 per cent.
The ASX retailer posted a 3.7 per cent dip in its 2023 financial year profits to $524.6 million as cost-of-living pressures saw customers shop around more for bargains.
The company is also facing a class action for selling extended warranties that allegedly had little or no value because customers already had those rights under Australian Consumer Law, and has not amended any of its practices in light of the lawsuit.
“We certainly believe we haven’t done anything wrong,” Smart said, adding that he would not comment further as it was before the courts.
Source: Thanks smh.com