We’re Up: JB Hi-Fi Defy Gloom Jumps 6.7%

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JB Hi-Fi have defied the gloom, announcing stellar growth for final six months of last year.

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The yellow retailer reported “solid” half year results for the six months to 31 December (HY12), in what it admits was one of the “most challenging” periods in its retail history.

Sales growth for JB Hi-Fi stores in Australia and New Zealand for the first half of fiscal 2012 overall was up 6.7% to $1.77bn, although comparative store sales slumped -2.2%.

Growth in Aussie stores was 5.6% to $1.65bn, while JB’s NZ enterprise enjoyed a whopping 28% growth to $124.9bn, although it opened no new stores there during the sales period.

Its Clive Anthonys branded stores also fared well – up 5.5%.

This industry defying growth was thanks to online sales which grew an astonishing 87.7% with December sales alone up 109%, and  ‘unique visitors’ averaging 1.4m a week during the month.

On average, weekly visitors hit 957,000 on Jbhifi.com per week over the six month period HY12.

Web sales was an “important sales generator for both in store and online sales” the company admitted, as it continues to refine its multichannel strategy which includes the ‘direct import’ of cameras and ‘factory scoop’ devices.

Earnings before tax slid 4.9% to $120.7m for the half year but was in line with the Company’s trading update released in December, which it called a “pleasing result.”

The fall in earnings was due to funding costs associated with the Company’s share buy-back in May 2011, which enabled earnings per share at 80.7c, JB Hi-Fi said in a statement today.

Gross margin fell 0.3% to 21.2% (HY11: 21.5%) and cost of doing business rose to 13.6% from 13.2% for first half 2011.

Computer and accessory sales all fared well although its visual business fell 17.1%, despite panel TVs increasing by 15%.

This was due to the average selling price slipping by almost a third. However, there was “good unit growth in branded and private label sets,” the retailer said.

Music, gaming and DVD sales disappointed however, down 0.7%, driven by weak Nintendo Wii and DS sales, although there was better growth in Sony PlayStation and XBox consoles.

“We saw total sales growth for the Company, with JB Hi-Fi branded stores growing 6.7%, and market share gains in what has been a very challenging retail environment,” said CEO, Terry Smart.

“We continue to evolve our model both in store and out of store, while maintaining our focus on those basic fundamentals which have and will continue to make us successful, being our unique brand personality, low cost of doing business and motivated and passionate staff.”

 

New stores have continued to perform to “expectations.”

10 new JB Hi-Fi stores were opened up in HY12 and one shut – all in Australia – bringing the total number here to 152 and 13 in NZ, while Smart’s retailer plans to open a further 6 stores in the second half of this year.

One Clive Anthonys store was also closed during the period, bringing the total count to 4. 

The Company has ambitious targets aheads and hopes to open 214 JB Hi-Fi branded stores or 13 to 15 stores per annum, it said today.

“With 53 JB Hi-Fi stores yet to open, the Company can look forward to many years of good organic growth.”

“The high return on investment generated by our new and established stores gives us the confidence to continue with our roll-out strategy.”

And its the unique ‘brand personality’ and popularity among the youth market that is driving sales, according to an earnings presentation released to the ASX.

What’s Ahead?

“We believe we continue to offer customers a real point of difference and, together with our low operating cost model, this positions us to be a major beneficiary of any industry consolidation,” said CEO Terry Smart.

JB HI-FI NOW, its new digital music streaming service was “soft” launched in December and is “gaining momentum” Smart said, and is moving to mobile platforms including iOS, Android and BlackBerry in the coming weeks, which should give the fledgling service a further push.

“Our online strategy, which has been evolving over the last 6 years, continues to deliver solid growth,” Smart added.

“The first stage of our digital strategy, our music subscription streaming service, JB HI-FI NOW, is gaining momentum and will accelerate in growth once we launch our mobile application in the next four weeks.”

However, the traditional three week post-Christmas sales period was “challenging” driven by the lower than anticipated TV panel sales, and further weaknesses in IT Accessories and Cameras due to supply shortages following from Thailand floods.

January sales fell 5.5%, with the retailer blaming “promotional fatigue” where consumers have not reacted as well post Christmas promos as previous years.

However, the retailer did say it has seen an improvement in February sales which for the month, to date, grew 8.4% (comparable store basis sales grew 1.0%) for branded JB stores.

“While it has been a tough start to the year we expect sales to improve as we cycle out the heavy promotional period of post Christmas and New Year sales,” said Smart.

Ultrabooks and tabs are expected to push computer sales this year, while JB also anticiaptes huge growth in 4G devices like the HTC Velocity, while the PSP Vita will drive gaming sales.

The Company expects sales in FY12 to be circa $3.1 billion, a 5% increase on last year, that is assuming trading conditions remain similar.

 

The directors have declared a fully franked interim dividend for the half year of 49.0 cents per share (HY11:48.0 cents per share), in line with the dividend policy of a payout ratio of 60% of HY12 NPAT, to be paid on 9 March 2012.

 The record date for determining the entitlement is 23 February 2012.

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