JB Hi-Fi has agreed to buy Victorian retailer e&s Trading amid special dividend

The consumer electronics retailer has snapped up its first acquisition in eight years, and will shower shareholders with a special dividend.

JB Hi-Fi has bought retailer e&s Trading and will pay its shareholders a special dividend. Picture: Darren England/AAP Image

JB Hi-Fi boss Terry Smart says he won’t let the current economic malaise and cost of living pressures hinder its growth path, as the retailer delivered a bumper special dividend to shareholders along with a buyout that opens a path into the commercial building market.

Flush with cash, as consumers load up on smartphones, small appliances, gaming devices and begin to pick up AI-powered computers, JB Hi-Fi has shelled out $47.8m to buy a controlling stake in kitchen, laundry and bathroom products chain e&s Trading while at the same time pouring $200m into shareholder pockets via fatter dividends.

The company’s shares jumped more than 8 per cent to end up $5.61 to $72.98 - a fresh all-time high for the stock which now gives JB Hi-Fi a market capitalisation of just under $8bn.

The acquisition of e&s Trading will give the retailer its first major entry into the commercial building, architecture and housing market where decisions on expensive whitegoods like fridges, benchtops and baths are made in the design and build stage, and also compliments JB Hi-Fi’s existing whitegoods business, The Good Guys.

“It’s another avenue for growth, an area where we don’t service for the current brands (JB Hi-Fi and The Good Guys) and so it is just about expanding our reach with our customers and our product categories,” Mr Smart told The Australian as the retailer posted a 0.4 per cent fall in full-year revenue to $9.592m as net profit fell 15.4 per cent to $438.8m.

Sales were slightly above market expectations, while its profit easily beat consensus forecasts of around $422m.

Mr Smart said JB Hi-Fi’s flagship Australian arm booked 1 per cent sales growth in fiscal 2024 and “good positive momentum” into the last quarter which flowed into July as shoppers still found a place in their budgets for technology.

“It’s tech, it’s home entertainment, they still want and can’t do without tech and they are continuing to upgrade but they are looking for value and that’s exactly who we are as a brand.”

This search for savings and good value was seeing “haggling” on the shop floor as customers compared prices and looked for a good deal.

But Mr Smart was still optimistic about his retailer’s ability to perform strongly despite the economic headwinds of cost of living pressures, nervous consumers and fears of interest rates staying higher for longer.

“I guess we don’t think let the economic outlook restrict how we think about the growth of the business, there may be less shoppers but those that are buying we just make sure we work hard every day that they buy from us.”

JB Hi-Fi declared a final dividend of $1.03 per share fully franked, down 12c or 10.4 per cent, and to be paid on September 6. The shareholder return was down due to lighter earnings which translated into less money directed to the dividend based on its payout ratio of 65 per cent of net profit. However, flush with cash, plenty of balance sheet strength and optimism about the company’s future, it declared a special dividend of 80c per share fully franked, or $87.5m in total, and will see the retailer together with the final dividend distribute $200m to shareholders.

Staff and customers at an e&s showroom.

At JB Hi-Fi New Zealand sales rose 12.3 per cent to $NZ327.9m ($298.4m) as the division reported an earnings loss of $NZ2.3m, a swing from a small profit in the year before.

The Good Guys posted a 4.8 per cent sales fall to $2.68bn as earnings dropped 25.8 per cent to $158.1m.

In a sales update provided as part of the full-year results, JB Hi-Fi same store sales growth was up 5.2 per cent for July, JB Hi-Fi New Zealand sales down 4.9 per cent and The Good Guys sales up 2.7 per cent.

JB Hi-Fi, which last made an acquisition in 2016 with the $870m purchase of The Good Guys, announced on Monday along with its full-year results that it would buy e&s and its 10 Victorian showrooms to give it a better reach into a premium home appliance category. JB Hi-Fi said it has agreed to an initial acquisition of 75 per cent of e&s for cash consideration of $47.8m and a put and call option arrangement in place for the acquisition of the remaining 25 per cent in September 2029

In fiscal 2024 the retailer had revenue of around $230m and adjusted earnings of $7m. The retail chain was established in 1962 by the Sinclair family, who still own the business, with Rob Sinclair to remain as managing director of the business.

JB Hi-Fi does have exposure to the whitegoods category through its Good Guys chain, However, the deal to bring in e&s to its growing retail empire will give it entry into the bathrooms space as well as forge links with large commercial customers and volume builders who often shop for large home products - like fridges, ovens and bathtubs - as they build a home for a customer.

“Our brands don’t really translate well into that area of the builders, the architects, space, so it’s a skill set that we don’t have, and hence, purchasing e&s, they have that skill and we’re going to now leverage that and continue to grow the e&s business.”

Mr Smart said JB Hi-Fi would help take e&s national and would begin looking for appropriate properties.

Rob Sinclair, managing director of e&s, said JB Hi-Fi’s investment in the company demonstrated its confidence in the business model and the opportunity for strong growth at the premium end of the sector.

“This partnership will allow us to expand our reach and continue delivering exceptional service and top-notch products to our valued customers,” said Mr Sinclair, whose father Bob founded the business in 1962 with his two brothers.

“JB Hi-Fi’s deep understanding of the homemaker sector and extensive experience in the appliance industry make it an ideal partner for our business. E&s’s established reputation as an industry leader in the high-end appliance market will complement JB Hi-Fi Group’s existing businesses and bring a new premium offering to the JB Hi-Fi Group.”