Soft start to new financial year for electronics giant JB Hi-Fi as stockpile mounts

JB Hi-Fi has piled up on stock in response to last year’s Covid-related supply shortages, a reaction that landed rival Kogan in hot water.

JB Hi-Fi has built up a big product stockpile after being hit by Covid-related supply shortages last year, prompting a warning the electronics retailer could find itself in the same situation as Kogan.

The online-only company found itself slugged with high warehousing costs as a result of its overzealous stockpiling and was forced to discount heavily – work that continued at Kogan’s last trading update in July.

JB Hi-Fi booked a big surge in earnings for 2020-21 on Monday, driven by the well-observed pandemic trend of buying for the home, but now has nearly $1bn in inventory and started the new financial year softly due to lockdowns.

Inventory at the end of June amounted to $938.8m worth of stock, up $199.5m, as product availability continued to rise from the lows of fiscal 2020.

Online sales soared in 2020-21 – a trend seen across the retail sector during the pandemic. Picture: Joel Carrett / NCA NewsWire

While inventory turnover was up to a measure of 8.3x, from 7.7x for the previous financial year, overall sales for the first six-and-a-half weeks of 2021-22 were variable due to multiple state lockdowns, prompting JB Hi-Fi to not provide a full-year guidance.

Sales by JB Hi-Fi Australia’s store network were down almost 15 per cent and more than 8 per cent for its The Good Guys chain, but JB Hi-Fi New Zealand enjoyed an 8.4 per cent lift.

JB Hi-Fi said payables, which ordinarily would grow in line with inventory, were down year-on-year as inventory replenished depleted stocks “and supported the continued heightened customer demand”.

But Citi said the inventory build up was higher than expected.

“There is a risk of inventory over stocking as store closures limits sales growth,” Citi said.

Gaming technology was a growth category for JB Hi-Fi in Australia and New Zealand. Picture: Yelim Lee / AFP

Citi noted, however, that sales momentum had accelerated when viewed over a two-year period, which the retailer also emphasised.

The full-year results showed online sales continued to soar – a trend seen across the sector during the pandemic.

Games hardware was a key growth category for JB Hi-Fi in Australia and across the Tasman, while popular items sold by The Good Guys included refrigeration, laundry and floorcare.

The board declared a final dividend of $1.07 per share fully franked, bringing the total full-year payout to shareholders to $2.87 per share, up almost 52 per cent.

Shares in JB Hi-Fi were in the green against a broadly lower market, up 1.72 per cent to $49.15 in early trade.