JB Hi-Fi gains on Dick Smith pain

JB Hi-Fi’s full-year profit has beaten guidance, as Dick Smith’s failure helped boost the retailer.

JB Hi-Fi CEO Richard Murray said the company has enjoyed a strong start to fiscal 2017. (Picture: Tony Gough)

Consumer electronics retailer JB Hi-Fi has posted its strongest same store sales growth since the global financial crisis, when free payouts from the federal government found their way into new plasma TVs, iPods and DVDs. The result, posted this morning, has reinforced the group’s credentials as one of the best earnings generators across the retail landscape.

JB Hi-Fi chief executive Richard Murray told The Australian that consumers were prioritising purchases of new mobile phones, computers and other home entertainment products despite the wider concerns about the strength of the Australian economy, with the company’s “frugal’’ approach to doing business ensuring robust sales were quickly switched into rising profitability.

And this was occurring through the economic cycle, as consumers become ever more engaged, and perhaps fall in love, with their bit of tech.

“When I think about economic cycles, I think that low cost of doing business and just not letting waste and inefficiencies creeping in to the organisation – it’s a badge of honour around here,’’ Mr Murray told The Australian this morning after unveiling full-year net profit which increased a better-than-expected 11.5 per cent to $152.2 million in 2016.

“It’s a frugalness that is easy to maintain, it is very hard to build.

“And maybe at times when there has been a tough period for the economy, the technology cycle has encouraged customers to say ‘yes, I am going to prioritise the purchase of a new mobile phone over maybe some other things because it has become such a core component of our lifestyle’.’’

The love affair with new technology showed through in JB Hi-Fi’s results, with the consumer electronic retailer recording like-for-like sales growth across its stores of 5.4 per cent, the strongest comparable sales growth since 2009 when like-for-like sales jumped 11.5 per cent. That booming result was helped by the 2008 Beijing Olympics, as consumers upgraded their TVs, as well as the Rudd government’s $42 billion stimulus package to fend off the worst of the GFC which included cash payments to households.

This time around JB Hi-Fi was boosted by the collapse during the year of its key rival Dick Smith, which had annual sales of $1.3 billion. A significant chunk is expected to have found its way into JB Hi-Fi’s doors.

But Mr Murray said he believed consumer sentiment remained “fickle’’.

“I think we are obviously going okay, consumer sentiment is fickle, and broadly the Australian economy seems to be working hard at the moment and we need to make sure we have really good economic policy from all political parties that are focused on economic growth.

“Because the best way to drive consumer confidence is for everyone to have a job, the economy growing strongly.’’

The numbers outdid guidance offered at its half-year result of profit between $143m and $147m and revenue of $3.9bn.

Sales growth is expected to slow to 7.5 per cent for the year, however, as the positive impact of the closure of Dick Smith Electronics begins to wane.

“The closure of DSE during the second half of fiscal 2016 has contributed to an increase in our sales of computers, visual, audio and accessories,” Mr Murray said.

“We anticipate this will continue to drive sales growth in the first half of fiscal 2017; however the impact will moderate as we cycle through their decline and eventual market exit.”

The company expects to open seven new stores next year.

JB Hi-Fi delivered a fully franked final dividend of 37c a share. The number brings total payouts to $1 a share for the year, up 11.1 per cent on last year’s corresponding 90c payout.

At 11.15am (AEST), JB Hi-Fi shares had jumped 5.3 per cent to $28.83, against a broader market rise of 0.1 per cent.