Christmas joy for JB Hi-Fi
JB Hi—Fi shares briefly soared to an 11month high yesterday after analysts reported apparent strong Christmas trade for the electronic retailer.
JB HI-FI shares briefly soared to an 11-month high yesterday after analysts reported apparent strong Christmas trade for the electronic retailer, driven in part by the iPhone X and large TVs.
The report by Morgan Stanley analysts, who rated the stock as “overweight”, is more evidence that the crucial Christmas shopping period was not as bad as feared after Amazon’s local launch and a weak lead-in to the holidays.
Analysts are also more confident in the company’s ability to compete with Amazon.
“Amazon’s Australian launch on December 4 appears to have limited impact,” equity analysts Thomas Kierath and Monique Rooney said.
Indications of “strong Christmas trading” for JB Hi-Fi led Morgan Stanley to lift near-term sales and margin forecasts for the retailer.
“Channel checks indicate that the overall retail environment improved significantly from early December and could be characterised as ‘strong but late’,” Morgan Stanley said.
“In other words, retailers were nervous early – with some discounting – but consumers, as has been the trend, shopped late.
“A healthy technology cycle driven by the iPhone X, large flat panel TVs and drones will likely have helped JB Hi-Fi this Christmas too.”
The retailer’s shares jumped almost 7 per cent in early trade before dropping back to close up 4.4 per cent to $27.99 yesterday.
Comparing the performance of US peer Best Buy while competing with Amazon, the researchers said they were confident JB Hi-Fi could maintain its margins long term because Australia’s retail landscape was less competitive and because JB Hi-Fi had a comparatively higher level of market share.
“Our comparison of JB Hi-Fi and Best Buy’s operating metrics shows that JB Hi-Fi is a more productive, leaner model with a stronger growth outlook,” they said. While Mr Kierath and Ms Rooney said they remained cautious about the broader consumer cycle, they believed JB Hi-Fi to be a “best-in-class retailer”, with the ability to take advantage of department stores that close branches and withdraw from the electronics area, coupled with the healthy technology cycle.
It comes after Deutsche Bank research showed that retailers were reporting solid sales growth in December despite a quiet period in November, with many saying sales from Boxing Day through New Year’s Eve exceeded ex- pectations by a “considerable margin”.
“This was not the terrible Christmas it was looking like it could have been back in November and while it is still very early days, Amazon’s soft launch suggests it could take far longer … to have an impact,” Deutsche analysts said.