JB Hi-Fi posts bumper first-half result and hikes dividend, but a rate cut is no ‘free kick’

Terry Smart says an interest rate cut as early as next week ’can only be good’ for shoppers, retailers and the economy, but JB Hi-Fi remains focused on value for customers.

JB Hi-Fi chief executive Terry Smart.

JB Hi-Fi chief executive Terry Smart says an interest rate cut as early as next week “can only be good” for shoppers, retailers and the economy as household budgets are bolstered, but his main focus remains on ensuring his retail brands are front of mind for consumers when it came to price and service.

While JB Hi-Fi once again set the benchmark this reporting season as it unveiled an interim result that beat market expectations and included a large ratcheting up of its dividend, Mr Smart said there were no “free kicks” in retail and the electronics retailer had worked hard for every sale amid ongoing cost-of-living challenges that kept many shoppers on the sidelines.

Mr Smart said laggard categories such as TVs had rebounded into growth in the December half, and its JB Hi-Fi and Good Guys chains had also benefited from strong sales in categories such as small appliances, fridges and computers.

All eyes were now on the RBA board meeting next week, which should help that strong sales trajectory to continue, but the retail boss wasn’t relying on slimmer mortgage repayments alone to keep his tills ringing this year.

“It (an interest rate cut) can only be good, in the sense that it’s some positive news for the consumer and household budgets, so it’s positive, but again, we just stay focused on the value and just getting customers to shop with our brands,” Mr Smart told The Australian after JB Hi-Fi posted a 9.8 per cent lift in interim sales to $5.67bn and an 8 per cent jump in first-half profit to $285.4m.

“You have to work hard for every transaction and that will continue beyond rate cuts.”

If there is a cost-of-living crisis at the moment it hasn’t laid a glove on JB Hi-Fi. The retailer, which also recently bought a controlling stake in kitchen and bathrooms specialist e&s, unveiled half-year sales that were about $160m above market expectations, and net profit $1.5m ahead.

Flush with cash from a bumper December half, as cooking appliances, fridges and TVs flew off the shelves, JB Hi-Fi also hiked its interim dividend, declaring an interim dividend of $1.70 per share, up 12c or 7.6 per cent, and payable to investors on March 7.

One of the first retailers to showcase its results this earnings season, and with a strong result at that, shares in JB Hi-Fi surged 5.5 per cent to an all-time high of $108.08 as trading volumes raced to three times the average volume over the last three weeks. But by afternoon trade, profit takers moved in to send JB Hi-Fi into the red and the stock eventually closed down 4.6 per cent at $97.78. The stock had risen more than 60 per cent in the last 12 months.

The retailer warned that while its strong sales momentum through to Christmas had continued into the new calendar year – with its local JB Hi-Fi posting same-store sales growth of just over 7 per cent – it was cautious given the uncertainty swirling around the Australian economy and competitors heavily discounting to shift stock.

That competitive heat did shave some margin from JB Hi-Fi’s margins for its flagship Australian arm, which fell 17 basis points and was worse than analyst forecasts.

“Given the strong run into the result, we expect the market was anticipating an earnings beat to consensus,” said Citi analyst Adrian Lemme. “There may be some concerns about the weaker gross margins. We may see some share price weakness today, however the very positive sales update for January likely limits this.”

Mr Smart said the company’s competition had invested heavily in discounts and promotions, which JB Hi-Fi had matched to maintain its “bargain halo” with shoppers who were drawn into its stores and online platform due to its range and service.

“In this challenging trading environment, marked by heightened competitor activity, our focus remained on maximising demand through delivering consistently high levels of customer service and exceptional value for our customers,” he said.

“The brands (JB Hi-Fi, The Good Guys, e&s) are absolutely trusted on providing the price, getting the right price … they are absolutely trusted on price.

“If somebody wants to go cheaper we will also match them or go lower, so we are really conscious on ensuring that we are driving that value.”

At its flagship Australian JB Hi-Fi arm total sales increased by 7.2 per cent to $3.88bn with comparable sales up 7.2 per cent.

The result was driven by continued customer demand for technology and consumer electronics products, and supported by well-executed Black Friday and Boxing Day promotional periods, the retailer said.

JB Hi-Fi has posted better than expected sales and hiked its interim dividend strongly. Picture: Andrew Henshaw/NewsWire

The cost-of-living crisis might be front of mind for shoppers but that didn’t rein in their spending for mobile phones, small appliances, computers, TVs and cameras. Online sales increased by 16.4 per cent to $682.7m, or 17.6 per cent of total sales. JB Hi-Fi Australia’s gross profit increased by 6.4 per cent to $846.4m with gross margin down 17 basis points to 21.8 per cent, driven by sales mix and increased competitive activity.

Meanwhile, at its JB Hi-Fi New Zealand business, sales increased by 20 per cent to $NZ202.5m ($182.25m) as earnings returned to profitability of $NZ2.2m, up $NZ2.7m.

At The Good Guys, total sales increased by 9.2 per cent to $1.52bn. Key growth categories were floorcare, TVs, portable appliances, cooking and refrigeration.

For the period of ownership, total sales for e&s were up 7.6 per cent to $92.3m, with comparable sales up 7.2 per cent. EBIT was $1.9m, in line with the group’s expectations.

In terms of the start to the second half, JB Hi-Fi said its sales growth for JB HI-FI Australia in January was 7.4 per cent with comparable sales growth of 7.1 per cent. At JB Hi-Fi New Zealand, sales grew by 20.4 per cent with comparable sales growth of 10 per cent. Total sales growth for The Good Guys was 6.4 per cent and comparable sales growth was 5.9 per cent. At its e&s division, sales rose 8.1 per cent as comparable sales grew 7.5 per cent.

“While we are pleased to see sales momentum continue into January, we remain cautious given the uncertainty in the retail market and the continued competitive activity,” it said.

“We will continue to adapt and innovate to ensure we remain top of mind as the destination for our categories.”

Originally published as JB Hi-Fi posts bumper first-half result and hikes dividend, but a rate cut is no ‘free kick’