Margins squeeze JB
JB Hi-Fi shares have slumped despite a big lift in first-half profit, after the retailer warned of margin pressures and issued lower-than-expected guidance.
JB Hi-Fi shares have slumped despite a big lift in first-half profit, after the home electronics and entertainment retailer warned of margin pressures and issued lower-than-expected guidance.
Net profit for the six months to December 31 surged 37.4 per cent to a record $151.7 million after healthy Christmas sales across a store network that now includes The Good Guys chain.
But JB Hi-Fi shares fell as much as 8.6 per cent yesterday after the company said a focus on lower-margin goods would result in sales growth exceeding gross profit dollar growth in the second half.
Chief executive Richard Murray flagged full-year profit guidance of between $235 million and $240 million, which Citi analysts said was below consensus by as much as 3 per cent.
“JB Hi-Fi has rallied strongly into this result on high expectations for Christmas trading,” Citi said in a note.
“While this proved correct, concern is likely to build around gross margin pressure.”
Sales revenue for the six months to December 31 surged 41 per cent to $3.69 billion, reflecting the strong Christmas as well as the November 2016 acquisition of whitegoods retailer The Good Guys.
Sales at JB Hi-Fi’s Australian stores grew 10.8 per cent to $2.48 billion – up by 7.8 per cent on a comparable sales basis – driven by growth in communications, computers, audio, drones and games hardware.
Mr Murray called out sales of Google Home and the Nintendo Switch console as bright spots for JB Hi-Fi.
“It was another strong result for the JB Hi-Fi business in Australia, particularly through the important November and December periods,” Mr Murray said.
Sales dipped 0.4 per cent in New Zealand but rose 2.4 per cent at The Good Guys, which contributed to a full first-half result for the first time. Seven new JB Hi-Fi stores opened in Australia during the period and one closed in New Zealand, while two new The Good Guys stores were opened.