Haggling customers put bite on JB Hi-Fi
JB Hi-Fi boss Terry Smart says shoppers are increasingly haggling with his staff when looking to buy a new plasma television or computer, as they are focused on value and prepared to shop around for the best price amid the cost-of-living crisis.
The pressures on households look to have emboldened customers to haggle more and push back on retailers to come back to them with the best price or risk them walking out the door.
Those negotiations on the floors of his JB Hi-Fi stores are putting the pressure back on the consumer electronics giant to offer improved discounts to secure sales and beat rival chains, which has come at the cost of profit margins over the December half.
“It is on-floor discounting, so it is when a customer comes, and we negotiate on price, and we have seen a lot more on-floor discounting,” Mr Smart said on Monday. “We have seen it increase, and it is returning back to much more a pre-Covid base.
“Consumers are very focused on getting good value, and they are pushing harder, that’s how we operate, that’s what we do, and we want to get the sale, and we will negotiate with the customer and do everything we can to secure that sale.”
The flip side, however, was pressure on profit margins.
On Monday, JB Hi-Fi suffered an uncharacteristic drop in revenue and net profit, with the company’s interim dividend slashed as it kicked off reporting season for the retail sector by conceding the trading outlook has deteriorated.
JB Hi-Fi has posted a firsthalf net profit of $264.3m, down 19.9 per cent, with revenue for the half down 2.2 per cent to $5.16bn. Sales were slightly below analyst consensus forecasts, although the net profit was better than the $245.2m pencilled in by the market.
The retailer slashed its interim dividend by 20 per cent to $1.58 a share, from $1.97 a year earlier, and payable on March 8.
Costs and profitability at its Australian JB Hi-Fi stores suffered, dragging the result lower, with heavy discounting impacting earnings. Its New Zealand JB Hi-Fi stores are barely profitable.
However, shares in JB Hi-Fi rallied 7 per cent to a record high of $60.79 on the result as the market was relieved the profit wasn’t as bad as feared; that it actually beat more dour analyst expectations with the dividend – although heavily cut – was also slightly better than hoped.
Mr Smart said he was pleased with the result for the first half as it cycled elevated customer demand in the prior year, but that the trading outlook had become harder.
“As expected, we saw the trading environment become more challenging, marked by heightened competitive activity and increased on-floor discounting,” he said.
For its flagship JB Hi-Fi stores in Australia, total sales increased by 0.7 per cent to $3.62bn, with comparable sales up 0.1 per cent, driven by continued customer demand for technology and consumer electronics products.
The key growth categories were mobile phones, games hardware, small appliances, white goods and services. Gross profit decreased by 3 per cent to $795.6m.
At JB Hi-Fi New Zealand, sales fell 5.1 per cent to $NZ168.7m ($158.6m) and earnings of $NZ400,000 were down from $NZ5.8m. Mr Smart said the company was heavily investing in its New Zealand arm, which would see some losses in the short term.
The company’s The Good Guys retail business saw sales fall by 9.9 per cent to $1.39bn Earnings for The Good Guys dropped nearly 31 per cent to $92.5m.
In a trading update for the month of January, the retailer said same store sales at JB HiFi Australia were up 1.7 per cent, down 4.1 per cent in New Zealand and The Good Guys growth was down 2.2 per cent.