JB Hi-Fi boosts dividend as retail spending spree fuels record earnings

RBA rate rises have done nothing to dent a spending splurge on TVs and coffee machines, helping JB Hi-Fi book record earnings and a 43 per cent dividend jump.

JB Hi-Fi says rising rates and lower consumer confidence has yet to impact its sales momentum, with the retailer’s local arm recording an 9.7 per cent rise in revenues in July after a strong year of growth.

The strong result – a continuation of a spending spree started in the pandemic – has meant JB Hi-Fi is lifting its final dividend by 43 per cent and, when added to the recent off-market share buyback, will shower shareholders with $604m in returns for 2022.

On Monday, the retailer announcing a 3.5 per cent lift in sales in the 12 months to June 30 to $9.232bn, as net profit for the year rose 7.7 per cent to $544.9m.

“It’s hard to predict what’s going on, or for me to predict, what’s going on with the consumer, it is just that our categories continue to be highly desirable categories,” JB Hi-Fi chief executive Terry Smart said.

“We have been calling out that we feel that a lot of our categories are becoming less and less discretionary, especially with a lot of the tech products.

“With products like mobile phones, they are just so integrated into people’s lives that they will continue to upgrade those as they need to or want to, and then the other products such as home appliances, we’re very much focused in that replacement market.

“These results reinforce the enormous trust our customers have in our brands and the strength of our multichannel offer, which continues to provide customers with choice on how to shop,” Mr Smart added.

The retailer revealed that in July – which followed three rate rises by the Reserve Bank – total sales for JB Hi-Fi Australia were up 9.7 per cent and same-store sales rose 9.2 per cent.

Its whitegoods specialist The Good Guys also posted strong growth into the new year with sales up 7.8 per cent for July and same-store sales growth of 7.8 per cent. The group operates 213 stores in Australia and New Zealand and 106 Good Guys stores.

A retail sales assistant is seen inside a JB Hi-Fi store in Brisbane. Picture: Darren England/AAP Image

“We haven’t seen an immediate turn off or decline in spending during these times,” Mr Smart said. “We have to be careful and I don’t want to be cocky, but we haven’t seen that impact us yet.”

Analysts at Citi said the July trading update set “a positive tone for (the first half of the 2023 financial year)”.

“Despite 175 basis points of cash rate increases, and broad rise in the cost of living, we have yet to see the impact on JB Hi-Fi sales,” wrote Citi’s Adrian Lemme and James Wang. “We expect a strong (first half) sales result benefiting from better stock levels at the key sales periods of Black Friday and Boxing Day. We expect the momentum to slow in (the second half).”

The upbeat performance helped fill investor pockets with a substantial lift in dividends. JB Hi-Fi declared a final dividend of $1.53 per share, up 43 per cent, payable on September 9.

At its flagship Australian stores total sales increased by 4 per cent to $6.2bn, with comparable sales up 3.4 per cent. Sales momentum was strong through the year, particularly in the second half with sales up 11.7 per cent, driven by continued heightened demand for consumer electronics and home appliances.

The fourth quarter did see a pivot by shoppers from online to the physical stores as fears over the latest Covid-19 wave in early 2022 started to peter out and consumers once again felt comfortable venturing out to shopping centres.

JB Hi-Fi said key growth categories were communications, visual (TVs), small appliances, smart home and accessories. Online sales grew 52.3 per cent to $1.19bn or 19.2 per cent of the total. Helping to fuel the surging sales were consumers replacing equipment for home offices and seeking the latest tech upgrades, which Mr Smart believes will be an ongoing trend.

“The way I view that is that people have been working from home, but what they’re doing is upgrading their technology now they really understand what they need in the home,” Mr Smart said.

“We have seen those sales of tech-related products for working from home continue to perform strongly and we expect that those sales will then start falling into a typical replacement cycle in the next few years as well.”

Gross profit for the Australian fleet of JB Hi-Fi stores increased by 4.7 per cent to $1.39bn with the gross margin up 15 basis points to 22.4 per cent, driven by strong improvements in key categories, particularly in the second half.

Its JB Hi-Fi New Zealand arm saw sales rise 0.3 per cent to $NZ262.4m ($238m), with comparable sales also up 0.3 per cent, and sales in the second half of the financial year up 6.3 per cent.

Total sales at The Good Guys rose 2.7 per cent to $2.79bn with comparable sales growth of 2.2 per cent. Sales momentum was strong in the second half with sales up 6.7 per cent, driven by the continued demand for electronics and home appliances.

The key growth categories for 2022 were laundry, portable appliances, vacuum cleaners, dishwashers and TVs. Online sales for 2022 were up 53.7 per cent to $397m or 14.2 per cent of total sales. Shares in JB Hi-Fi closed down 1 per cent at $45.10.