JB Hi Fi shares up six percent on earnings resilience despite tough 1H24 market conditions

About JB Hi-Fi Limited

JB Hi-Fi Limited (JB Hi-Fi, the Group, ASX: JBH) is a leading retailer of technology and consumer electronics and home appliances in Australia and New Zealand. The Group operates 327 stores at sites located in most Australian States and employs 15,000 people. Established in the Melbourne suburb of Keilor East in 1974, JB Hi-Fi listed on the ASX in October 2003. The $1.55 Initial Public Offering (IPO) share price commenced trading at $2.20.

Demand for technology and consumer electronics products remains resilient

Mobile phones, games hardware, small appliances, and whitegoods remain in strong demand from consumers, offsetting softness in consumer electronics categories sold under the Good Guys brand, in the first half of the 2024 financial year. However, the $34.5 million lift in sales under the JB Hi Fi brand was not enough to compensate for the $153 million sales drop under the Good Guys brand. At a Group level, total sales were flat at $3.61 billion and online sales increased slightly by 0.8 percent to $543 million, or 15 percent of total sales.

Gross profit for the Group was down 3 percent in the December half to $796 million, and the gross margin dipped slightly to 22 percent, down from 22.9 percent in the previous corresponding half-year.

Inventory turnover increased slightly from 6.9 times in the first half of the 2023 financial year to a respectable 7.2 times in the December half, which explains the $47 million drop in closing inventory to $1.16 billion and a $98 million increase in net cash to $488 million at 31 December 2023. The Group remains debt-free, excluding lease liabilities. Payables are down 4.2 percent year on year in line with the decrease in inventory.

The interim dividend is down 20 percent to $1.58 per share fully franked and will be paid on 8 March. This amount represents a pay-out ratio of 65 percent of net profit after tax.

January 2024 Group sales update

The month of January has seen the second half year off to a satisfactory start in line with Group expectations. Sales growth for JB Hi Fi Australia is up 2.5 percent and for JB Hi Fi New Zealand up 8.2 percent, buoyed by three store openings in NZ during the half-year. Sales under the Good Guys brand are down 2.2 percent. The Good Guys brand accounts for about 27 percent of Group sales.

In an interesting footnote to the audited half-year financial statements reference was made to the Statement of Claim in the Supreme Court of Victoria regarding a class action relating to the sale of extended warranties in the Group’s JB Hi Fi Australia business. The Group considers that a negative outflow is not probable and so no provision has been raised and the claim will be vigorously defended.

Looking ahead, the Group’s scale and low operating costs should ensure that it remains the number one player in the low-price market segment for Australian Consumer Electronics and Home Appliances. This market position is supportive of steady earnings growth over the medium-term, including during times of challenging market conditions that are being experienced at present.