JB Hi-Fi unveils $250m share buyback, $1.63 per share dividend as online sales surge

Amid buoyant online sales, the electronics heavyweight is returning a whopping $437m to investors via a $250m buyback and $1.63 a share interim dividend.

JB Hi-Fi, led by Terry Smart, will hand back $437m to shareholders via a share buyback and interim dividend as online sales surge 63 per cent.

JB Hi-Fi boss Terry Smart has drawn a line in the sand against simply passing on higher prices to shoppers by pledging to withstand cost pressures from suppliers to remain competitive, but has sweetened the deal for shareholders with a $437m capital return.

Declaring on Monday that “the customer comes first”, Mr Smart revealed that his consumer electronics retail giant was viewing steeper prices for categories such as home appliances, where inflation was running at 8 per cent.

But he said he would resist hiking up his shelf prices as he focused on protecting volumes and, in the long run, his investors.

“It is the customer that comes first, we’ve got to make sure our prices are sharp. We’re competitive … we are remaining competitive, so you know that that really keeps us focused on our costs and what we can do and we can’t pass on.”

Mr Smart, who last year returned as JB Hi-Fi chief executive for a second tour of duty after former boss Richard Murray joined Solomon Lew’s Premier Investments as its new CEO, said this resistance to simply waving through price increases to customers would deliver returns to the business over the long term.

And in an industry where sales volumes count this was crucial.

“It’s all about volume. It’s all about continuing to service the customer. You know, the worst thing we can do is take a short-term view of anything. We take a long-term view and that is that we’ve just got to continue to attract the customers to JB Hi-Fi,” he said.

“We‘ve got to stay competitive. We will manage the rest of the business around that to ensure return to shareholders.”

This attitude was in stark contrast to other companies this reporting season, such as packaging giant Amcor and building products supplier Boral which have decided to shift higher costs flowing from energy prices, supply chain disruptions and labour shortages onto the customer.

But JB Hi-Fi is not leaving shareholders out in the cold to carry the weight of its customers. On Monday the retailer, which also owns white goods specialist The Good Guys, showed it could harness the strength of its retail model fuelled by unprecedented demand for consumer goods through the pandemic to shower its shareholders with $437m in capital returns.

The retailer announced a capital return of $250m to shareholders by way of an off market buyback while also reporting an interim dividend of $1.63 per share, amounting to a total dividend payment of just under $190m to its investor base, despite the company reporting a fall in its half-year profit.

JB Hi-Fi — whose chains have been one of the retail hot spots through the Covid-19 pandemic as consumers fill their homes with TVs, game consoles, dishwashers and other home goods — reported a 9.4 per cent slide in December half profit to $287.9m as total sales fell 1.6 per cent to $4.86bn.

“We continued to see elevated demand across all of our sales channels, particularly online which our customers seamlessly transitioned to during the various lockdowns demonstrating the strength and trust in our brands,” Mr Smart said.

At its flagship JB Hi-Fi Australian arm total sales declined by 1.9 per cent to $3.29bn, with comparable sales down 2.5 per cent.

Sales momentum was strong through the half with the key growth categories small appliances, smart home, games hardware, accessories and visual.

The retailer said online sales grew 59.9 per cent to $823.9m or 25 per cent of total sales.

At its The Good Guys white goods retail arm, total sales declined by 0.8 per cent to $1.44bn, with comparable sales down 1.3 per cent. The key growth categories were portable appliances, floorcare, laundry, dishwashers and cooking. Online sales were up 69.8 per cent to $251.3m or 17.5 per cent of total sales.

In a trading update accompanying the results, JB Hi-Fi said that in January, despite the disruption to its supply chain and operations as a result of Covid-19, the group continued to see heightened customer demand and strong sales growth rates over a two-year period.

Over January same store sales for JB Hi-Fi Australia rose 3.6 per cent, were down 1.8 per cent at JB Hi-Fi New Zealand and up 1.9 per cent for The Good Guys.

Mr Smart said there was a strong pipeline of demand ahead for the business including consumers who had set up home offices and would soon be looking to upgrade their home technology.

“That’s in the future. You know where it’s coming from. It’s just that pipeline is much bigger now. And all those (home office) computers then in the coming years will fall into the replacement cycle. And that represents an opportunity for us.”

Meanwhile, under details for the capital return JB Hi-Fi said it is expected that the class ruling, when issued, will confirm that the buyback price will comprise a capital component of $3.18 per share, with the remainder treated as a dividend which will be fully franked. Assuming a buyback size of $250m, the group will distribute to shareholders approximately $99m worth of franking credits.

JB Hi-Fi also declared an interim dividend of $1.63 per share, down from the $1.80 per share paid in 2021, and payable on March 11.

Shares in JB Hi-Fi ended up 5.4 per cent on Monday at $51.71.