JB Hi-Fi turns up the volume in lockdown

JB Hi-Fi CEO Richard Murray believes working from home will be a permanent feature of the economy after the pandemic passes.

JB Hi-Fi CEO Richard Murray. Picture: AAP

JB Hi-Fi chief executive Richard Murray believes working from home will be a permanent feature of the economy after the coronavirus pandemic passes, positioning the consumer electronics retailer as a key destination for consumers fitting out home offices with gadgets and technology.

Mr Murray said JB Hi-Fi and its whitegoods specialist The Good Guys had proved their value proposition and reach in the first few months of 2020 as panic shopping extended to TVs and freezers, but smaller and more marginal operators in the sector might struggle in the longer term.

He expects a consolidation of the consumer electronics sector, saying a burst in sales for smaller players enjoying in March and April is not enough to rescue an otherwise inefficient business model in the face of larger national chains. “There is no doubt that technology continues to be an important purchase.

“I sense the work from home dynamic is a permanent change,’’ Mr Murray told The Australian.

“Yes, people will want to work from their office but there is no doubt that more people will work from home than ever before, and that will be part of a modern flexible work-life balance.

“Over time people will ­continue to upgrade their home offices to ensure they can work productively from home — it has only just started.”

JB Hi-Fi confirmed its status as one of the best retail performers during the coronavirus pandemic as shoppers rushed its stores and went online to make their purchases.

The retailer said on Thursday it expected total sales for fiscal 2020 to hit $7.86bn, up from the target of $7.33bn disclosed at its interim results announcement in February.

The consumer electronics chain is now forecasting net profit for the full year in the range of $300m-$305m, an increase of 20-22 per cent on fiscal 2019.

Helping fuel the earnings drive is consumers chasing deals on whitegoods, with The Good Guys witnessing a massive increase in its sales in the early months of 2020 as its same-store growth pushed past 20 per cent.

The retailer also said strong cost controls and operating leverage had more than offset the costs from implementing new health and hygiene systems in the wake of COVID-19.

However, the impact to its New Zealand business could see JB Hi-Fi book impairments of $25m in the 2020 accounts, the company said.

Shares in the retailer fell sharply yesterday in line with the broader market rout, closing down 3.7 per cent at $40.43.

As households went into lockdown and social distancing became the norm across Australia and New Zealand, consumers were buying up consumer electronics.

JB Hi-Fi has enjoyed sales growth of 20 per cent for the second half to date.

Like-for-like sales of 4.9 per cent in the first half rose to 20 per cent for the second, with same-store sales for the financial year to date rallying to 10.7 per cent.

At The Good Guys, same store sales growth of 0.6 per cent in the first half increased to 23.5 per cent in the second half, and for the financial year to date was sitting at 10.3 per cent growth.

Its New Zealand JB Hi-Fi stores were hit by stricter government regulations that saw stores closed, with same-store sales of 0.8 per cent in the first half falling to a 19.3 per cent decline in the second half to date.

“When it comes to the technology in the home office, I think we are No. 1,’’ Mr Murray said.

“Technology is a mainstay. We have seen periods where home appliances have been in high demand and that has seen a lot of traffic and share move to The Good Guys.

“Our model is very agile and so we can adjust our staffing and our inventory, and this period has reinforced we have managed it very well.’’

Mr Murray said he believed the economic upheaval would see a shake-out and consolidation in the consumer electronics sector.

“There is still probably need of consolidation across the industry to more efficient players.

“Some of these sales would have helped the smaller, less capitalised players to hold on but over time I think there is still a lot of small players that feel very marginal.’’

The group also said it was in the process of reviewing the carrying value of certain NZ assets.

“This review is expected to result in a non-cash impairment in JB HI-FI New Zealand of approximately $25 million (post tax) in fiscal 2020. This estimate is still to be finalised and subject to auditor review.”

JB Hi-Fi said it was now targeting full-year total sales of $7.86bn, comprising $5.26bn at JB Hi-Fi Australia, $220m at JB Hi-Fi New Zealand and $2.39bn at The Good Guys.

The retailer also said it was investigating a scheme to reward its employees in recognition of their efforts during the coronavirus pandemic.