AS JB reports 6% sales jump, CEO says innovation is secret to success. It now forecasts sales to lift 6-8% in FY14
JB Hi-Fi today reported FY13 sales up 5.8% (H2 +10%), profits and earnings up, a massive result compared to some competitors
It is now predicting sales to lift 6-8% in FY14. Company shares soared 2.86% to $19.0 after the profits announcement.
So what’s its secret?
In an investor call today, CEO Terry Smart spoke of a number of key competitive advantages the retailer has – its market position “high value, low price focus.”
“We’ve always been a discount retailer” Smart said. JB Hi-Fi online and store marketshare both grew in Fy13. Its commercial business also grew almost 70% although from a small base.
He also alluded to JB’s “unique brand personality”, low cost operating model, and “adaptable model” – staying relevant to customers and entering new markets alluding to JB’s Home venture into the appliance market.
High traffic store locations were also key. “We want to remain a destination for customers and be where the customers are,” Smart said.
He also said new stores, although compact, enjoyed high sales per sqm, adding it has a solid pipeline of new properties it is examining as potential new locations for FY14.
It plans to have a total of 214 stores across ANZ.
Although Hardware sales were up 9%, like for like sales of Visual products fell almost 12% but showed improvement in H2 – down 2.6%, a category which has suffered price deflation, of late.
JB Hi Fi has cut back on TV categories in many newer stores including North Sydney.
Software, gaming and music sales also fell – down 2.6%, although the decline was less marked than in FY12, its investor presentation Fy13 shows.
Hardware now accounts for an increasing percentage of its total sales (78.5%:21.5%), despite recently launching new online services including eBooks.
Gross margin climbed 0.4% to 21.54 in FY13 amid price stablisation.
“The market remained very competitive in h2 but did not see the level of unsustainable pricing sees in pcpc,” the investor presentation indicated.
When questioned today about Dick Smith just-announced deal with David Jones, Smart said “we have a great model, and want to stay focused on what we’re doing and the growth ahead”
However, he admitted “we keep a watchful eye on the competition.”
Growth
Future product categories to show “above average growth” include telco, mobile and tablet upgrades, accessories, and “of course” gaming consoles, Smart said, with Sony and Microsoft are set to release new devices.
He also said Jb’s soon-to- be released video streaming and rental service will be “big one for us.”
JB Ceo also alluded to future sales growth in Ultra HD (4K) and OLED TVs, the digital switchover in Sydney and Melbourne and expanding Home appliances, market which is a circa $4.6bn market opportunity.
However, he alluded to possible price increase in appliance of 6-8%, and computers.
There was also an opportunities to push Home products online he said, adding “the long term opportunity is yet to be qualified.”
Annual incremental (appliance) sales will be circa $3m in year 1 and $5m in year two. JB may open as many as 50 Home stores in the next three years, it revealed today.
Although online sales were still standing at 2%, Smart said Jb’s website is driving instore sales. Online sales hit $65.9m in FY13 with 1.15 million visitors weekly.
Online and instore “feed off each other”, Smart insisted, adding JB’s online presence is vital to long term competitive offering
Referring to new website to be launched FY14, it will allow seamless experience across all screens sizes, PCs, phones and tablets, better search functionality and product information.
JB Now music, had 200K trial users and 10% stayed on as paying subscribers.
