JB Hi Fi has confirmed a whopping 45% increase in profits and a 27% increase in revenue making them the best performing consumer electronics retailer in Australia. In a presentation to shareholders today Chief Executive Richard Uechtritz has revealed some of the secrets to their succes.
Their latest results also stack up pretty when compared with similar retailers in the US and Europe. At today’s annual general meeting CEO Richard Uechtritz said that the company was on track to achieve growth of 20% in the next quarter which competitors like Harvey Norman and Clive Peeters are saying could be “soft”.
Uechtritz has also confirmed that the company is on track to open 22 additional stores this financial year. This is four more than what was expected. “While the economic outlook remains unclear, we are encouraged by recent signs the Australian economy and consumers are feeling more confident than this time last year,” Chief Executive Richard Uechtritz said.
In 2009 JB Hi Fi achieved the following:
An increase in revenue of 27% to $2.3 billion
An increase in net profit after tax of 45% to $94.4 million
An increase in earnings per share of 43% to 88.3 cents
Total JB Hi Fi dividends in the2009 financial year, increased by 69% from 26.0 cents per share in the prior year, to 44.0 cents, per share.
This represented a payout ratio of 50% in line with the board’s targeted payout ratio said Uechtritz.
Uechtritz claimed that shareholders who invested in the JB Hi Fi, IPO in October 2003 have achieved an annual compound return of 51.1% compared to 6.3% for the ASX 200 Accumulation Index over the same period.
“Low costs have allowed us to build upon our everyday low pricing. Low prices drive sales, increase our economies of scale which in turn allows the company to share this increase in value between the customer via lower prices and to the shareholder through increasing profit margins and dividends” he said.
“For the year ended 30 June 2009 our cost of doing business was 14.5%, a significant improvement from 15.3% in the previous year. We challenge ourselves to produce year on year improvement in this key performance measure” he added.
In a stab at the performance of competitors including Harvey Norman who operate a franchise model Vs the store owned model adopted by JB Hi Fi he said “Maintaining a lower cost base than our competitors, in the absence of materially better buying terms, makes it difficult for those competitors to match our pricing and still earn an appropriate return on capital. It is our belief that our low cost position becomes self reinforcing.
“Our low price position has certainly been a key driver of our market share growth during weaker macroeconomic periods. The ‘drift to thrift’ has been seen in a number of retail categories including consumer electronics. Increasingly customers have been emphasising price in their purchasing decision. The company has won customers that may not have previously shopped in our stores and now the opportunity is to keep those customers as economic conditions improve. Our increasing store presence means that JB can offer convenience as well as product and price, further improving our competitive positioning”
Uechtritz said “A lot has been made of the impact of the fiscal stimulus on retail trade and JB’s recent performance. There is no question that the stimulus payments supported retail trade over the last nine months. At JB Hi-Fi we did not experience a surge in demand correlated with the timing of the payments although we may have avoided dips that otherwise we may have suffered”
He added “Although the retail stimulus has run its course, positive economic news has provided the necessary impetus to drive a reasonable level of retail activity over the remainder of 2009/10. Unemployment could potentially have had a real dampening effect on consumer confidence but with estimates of maximum unemployment rates being revised downwards and GDP growth upwards, the foundation is set for a solid Christmas trading period. Whilst interest rates are likely to continue to rise in the short term to more normal levels, this should be seen by consumers as a further sign of confidence in a resurgent economy.”