JB Hi-Fi books record annual sales and profits but latest lockdowns hit sales

JB Hi-Fi’s incoming CEO Terry Smart is inheriting a business powered by a massive pandemic spending tailwind that appears to be running out of puff.

JB Hi-Fi sales and profits have surged, driven by consumers filling their homes with electronics through the pandemic but the latest wave of lockdowns have hit sales. Picture: Luis Ascui/NCA NewsWire

JB Hi-Fi’s incoming chief executive Terry Smart is inheriting a business powered by a massive pandemic spending tailwind that appears to be running out of puff.

The electronics retailer on Monday announced full-year net profit growth of 67 per cent for the recently concluded financial year, followed by a 15 per cent slump in same-store sales in the first two months of fiscal 2022 due to spreading lockdowns.

However, Mr Smart, now on his second tour of duty at the helm of JB Hi-Fi after former CEO Richard Murray left to join Solomon Lew’s Premier Investments, said consumers still had confidence to spend, were not overly worried about the state of the economy and in Western Australia – where there were no lockdowns – his stores were trading strongly.

“We can see lockdowns do have an effect,” Mr Smart told The Australian.

“We can see the strongest states are those that are not in lockdown, and those that are in lockdown are the lowest-­performing.

“What we tend to see is those higher-involvement, premium-style products which people tend not to transact online … they delay those purchases until stores are open.”

That was evident in the trading update provided by JB Hi-Fi, which showed from July to August 15, the opening months of fiscal 2022, same-store sales at JB Hi-Fi Australia fell 14.9 per cent and The Good Guys same-store sales fell 8.6 per cent. In New Zealand JB Hi-Fi’s sales were up 8.4 per cent.

Incoming CEO Terry Smart.

Mr Smart stressed the sales drop did not reflect any pull-back by shoppers fearing worsening economic conditions or holding on to cash as they feared for their job security, but rather the massive sales boosts seen through 2021 as the Covid-19 pandemic first emerged.

“Nothing is pointing to anything like that (economic concerns), it’s just simply cycling the large, unduly high, sales in 2021. If you still look at it on a two-year basis we are still seeing significant growth. However, it is just the quantum of last year’s sales that is the challenge.”

JB Hi-Fi continued its run of growing profitability, with full-year net profit up 67.4 per cent to $506.1m, as sales grew 12.6 per cent to $8.9bn.

The profit result was in line with profit guidance provided in July. Online sales for the year were up 78.1 per cent to $1.1bn.

In a growing trend playing out so far this reporting season, JB Hi-Fi has upped its final dividend by 18.9 per cent to $1.07 per share. The final dividend will be paid on September 10.

Same-store sales growth for its flagship Australian JB Hi-Fi chain came in at 13 per cent, with total sales revenue of $5.96bn.

The company said gross profit in the division increased by 13.4 per cent to $1.33bn with gross margin up 27 basis points to 22.2 per cent, driven primarily by improvements in key categories. Cost of doing business was 11.2 per cent, down 91 basis points.

The retailer’s The Good Guys business grew sales by 13.7 per cent to $2.72bn, with like-for-like sales up 13.7 per cent.

Sales momentum was strong through the year, with height­ened customer demand for home appliance and consumer electronics products.

The key growth categories were refrigeration, laundry, floorcare, portable appliances and visual. Online sales were up 48.5 per cent to $258.3m or 9.5 per cent of total sales.

Mr Smart said it was likely the retailer would have to consider price rises at some point this year as higher costs penetrated the supply chain. He said suppliers had taken on many of the elevated costs but eventually they would be passed on to retailers and then consumers.

Shares in JB Hi-Fi ended up $1.21 at $49.53.