Hi-Fives all around despite profits dip
JB HI-FI will give up profit margin as it looks to defend market share and invest further in its online offering following the arrival of Amazon.
Shares in the electrical and whitegoods heavyweight took their biggest one-day tumble in more than six years yesterday after its full-year profit forecast came in below analysts’ expectations.
JB Hi-Fi said its net profit was likely to range from $235 million to $240 million for the year to June.
That would be at least 13 per cent higher than in the past financial year, but the forecast was 2-3 per cent lower than analysts expected.
Chief executive Richard Murray said a focus on driving sales and market share, combined with growth in lower-margin product lines such as laptops and mobiles, would weigh on growth in the bottom line.
“We are clear on our objectives for the next 12 months and are excited in the outlook for the business,” Mr Murray said.
JB Hi-Fi is facing new competition from US online titan Amazon – despite its lacklustre launch in Australia – and it continues to square off against traditional rivals such as Harvey Norman and Kogan.
It has invested in its online offering, launching features such as three-hour delivery for some city areas, and responded to Amazon’s Australian launch with a major sales event.
Net profit at JB Hi-Fi surged to $151.7 million for the six months to December, up 21 per cent from the same period a year earlier, it reported yesterday.
Group sales rose 41 per cent to $3.7 billion as the retailer enjoyed a strong Christmas period across its store network, which now includes The Good Guys chain.
While sales and profit were up, JB Hi-Fi’s gross profit margin fell 0.20 percentage points to 22.02 per cent.
Citi analyst Bryan Raymond said the reduction in profit margin came despite JB Hi-Fi booking cost savings gained from its buyout of The Good Guys.
“JB Hi-Fi has rallied strongly into this result on high expectations for Christmas trading,” Mr Raymond said. “While this proved correct, concern is likely to build around gross margin pressure.”
Morgan Stanley analyst Thomas Kierath said while JB Hi-Fi’s earnings showed it was “flying”, The Good Guys result was “soft”.
Shares in JB Hi-Fi shed 8 per cent to close at $25.86 in their biggest fall since 2011.