JB Hi Fi and Super Retail Group March quarter sales remain resilient in a challenging retail environment.

About Super Retail Group and JB Hi-Fi Limited

Super Retail Group (Super Retail, ASX: SUL) with a share market capitalisation of $3.1 billion turns over about $4 billion annually, covering motor accessories, outdoor leisure equipment and sporting goods. The Group employs 15,000 people across more than 700 stores.

JB Hi-Fi Limited (JB Hi-Fi, ASX: JBH) has a share market capitalisation of $6.55 billion and generates annual sales of about $10 billion, covering technology and consumer electronics and home appliances. The Group operates 327 stores at sites located in most Australian States and employs 15,000 people.

Some Australian retailers are performing stronger than others

Australian retail sales volumes fell by 1.3 percent on a year earlier, however two retailers in Super Retail and JB Hi Fi are doing better than average in the current challenging and competitive retail market. Super Retail sales are down 1 percent, and JB Hi Fi Australia sales are down just 0.1 percent in the March quarter. JB Hi Fi is Australia’s largest home entertainment retailer and Super Retail’s focus is lifestyle categories of auto, sports, and outdoor leisure.

The strategic point of difference for both companies is they offer value-based offerings which appeal to a broad cross section of value-conscious Australian consumers. Value-based product offerings are less affected by higher residential mortgage interest rates and declining real household incomes, and this is reflected in current sales figures for both companies.

Record migration is driving economic growth 

In the 12 months to 30 September 2023, Australia’s migrant intake was 549,000 people. This figure is more than double the average annual intake of 217,000 people over the ten years prior to the Covid pandemic migration restrictions. The inability of the Australian economy to respond to added demand for goods and services (notably housing) has meant that this rapid influx of people has added to inflation.

Rapid migration has also boosted retail sales, which means that on a per capita basis, retail sales have declined by more than the headline numbers released by the Australian Bureau of Statistics. This suggests that on a per capita basis, Australian retail sales have fallen by more than the 1.3 percent official figure. This view is consistent with the observations of Super Retail’s CEO when on May 8 he noted that while store foot traffic and transaction volumes are up, the number of items per sale is down. It may well be that if it wasn’t for the additional 549,000 migrant population, Australia’s low GDP growth number may have been negative.

Looking Ahead 

Both companies are market leaders in their fields and are in a strong financial position with no drawn debt. This implies that there are no dilutionary capital raisings likely anytime soon and both businesses are well positioned for the future.

Super Retail will have a new three-year Enterprise Agreement in place from 14 July 2024  with Australian team members employed in the retail stores. The Agreement doesn’t apply to support office employees. Frontline retail store employees will receive higher penalty rates and a 5.25 percent base pay rate lift for the 2025 financial year.

Quality businesses perform well in any economic environment and Super Retail and JB Hi Fi are market leaders in their respective fields. Demand for their value-focused product offerings have remained resilient during the current challenging retail environment and so any improvement in economic conditions should result in higher future earnings for both companies.