COMMENT: The acquisition of e&s trading by JB Hi Fi is a move that will be of real concern to both Winnings and Harvey Norman commercial, especially as the residential construction industry is set to boom with growth also coming from the development of build to rent apartments in Australia.
The Managing Director of e&S is Rob Sinclair who is set to conmtinue running the recently aquired specialist retailer after being praised for his work to date by his new boss Terry Smart the Group CEO of JB Hi Fi.
ChannelNews understands that JB Hi has been looking to break into this market for some years with the Company also believed to have run a ruler over the books of Winnings an organisation they walked away from.
According to Smart the acquisition of e&S has always been the prime acquisition target vs the setting up of a new operation that sold premium appliances, with previous attempts failing to get over the line according to Smart during an interview with ChannelNews earlier today.
Smart told ChannelNews that it was now a case of taking a “Softly” approach with his recent aquisition.
“We need to learn about this business before we expand interstate, and our initial priority will be Victoria with an expansion of stores” he said.
“Rob Sinclair the managing director of the business is going to stay on, we will back him and his decisions. He has done a really good job in Victoria; he has given the brand a personality via TV advertising”.
“He has made the business relatable to people which is where there has been growth.”
Smart admitted that there are big growth opportunities expanding further into the commercial appliance markets, he also admitted that the deal has taken at least three years to get over the line with e&S moving to get “A lot of things in place” before the acquisition was done.
“We believe that we can make head roads in the residential market with premium appliances and then into the commercial market” he said.
E&S Trading, has 10 showrooms in Victoria and one in Canberra.
JB Hi Fi has paid $47.8 million for 75 per cent of the business with an option to take out the remainder in 2029 –
E&S Trading has annual revenues of $230 million and earnings of $7 million.
E&S Trading was founded in 1962 by Bob Sinclair and his two brothers.
Sinclair is an experienced executive, who is known for his networking and business skills in the premium appliance market.
He believes that the acquisition delivers an opportunity for “strong future growth at the premium end of the sector”.
“This partnership will allow us to expand our reach and continue delivering exceptional service and top-notch products to our valued customers,” says Sinclair, who will continue to lead the business following the acquisition.
E&S will retain both its brand and “unique operating model”, while operations at existing stores will remain unchanged under the new ownership.
“It will be business as usual at all existing stores,” he claims.
“I will remain managing director, continuing to employ our successful growth strategy on a broader scale.
“JB Hi-Fi’s deep understanding of the homemaker sector and extensive experience in the appliance industry make it an ideal partner for our business.”
The acquisition will be funded through existing cash reserves with settlement expected to occur in in September this year according to JB Hi Fi’s latest financials.
Appointing Sinclair as the the key decision maker is key when it comes to the expansion of the e&s offering, as the culture at e&s is radically different than that of The Good Guys and JB Hi Fi where discounting and volume is key.
JB Hi-Fi’s last major acquisition was in 2016 when they paid $870m to purchase of The Good Guys.
Earlier today, shares soared by 7.3% to $72.29 following the announcement, with analysts liking the new model which is wrapped around brands basically taking floor space in an e&s store and instead of taking the risk of carrying stock, premium appliance orders along with a deposit are taken before any stock is ordered.
Earlier today JB Hi Fi rewarded shareholders with a special dividend of 80¢ a share after delivering a better than expected profit.
JB Hi-Fi CEO Terry Smart said the expansion of the company into the servicing the commercial building market gave it new opportunities for growth.
The fact that e&S already has a successful formula operating in Victoria and the ACT, allows JB Hi Fi to expand into other States quickly with a proven model and relationships with some of the best premium appliance brands in the Australian market.
The key is the creation of e&S as a totally separate entity to both JB Hi Fi and The Good Guys.
Another growth opportunity for e&s is to plug in a custom install operation spanning entertainment, home networking and automation however Smart has ruled this out in the short term.
Winning tried this and botched it, resulting in losses with other customer installers having to finish jobs because they lacked the core skills needed to deliver a custom install operation..
Currently e&s has pro forma product relationships with the likes of ASKO, AEG, BORA, Capital, Falcon, Falmec, Fisher & Paykel, D.C.S, Gaggenau, La Cornue, Miele, Neff, Sirius Valentina, Smeg Fab, Smeg Linea, Smeg Portofino, Smeg Dolce Stil Novo, Speed Queen, Steel, Sub Zero and Wolf.
These are the premium brands that consumers, property developers and builders want to install to boost the value of a property when they sell off the plan or for residential customers who are renovating or building a new home and want to add perceived value.
According to the construction industry analysis, from 2024 to 2027, the building industry is expected to grow at an average rate of 3.1%, backed by the government’s investment in infrastructure.
The 2023-24 Budget, unveiled in May 2023, pledged $15.5 billion Australian Dollars to support construction.
For property developers the future is going to be all about the perceived value of an apartment or home with premium appliances playing a key role in the sale of an apartment or house.
Builders and property developers are today installing appliances from the likes of Gaggenau, Fisher & Paykel who are stripping share away from the likes of Miele with their integrated offering and NEF.
Premium and perceived premium are key according to property developers who are now selling multi million dollar apartments off the plan.
