JB Hi-Fi (JBH) is a chain of electrical stores, selling leading brands of hi-fi, speakers, televisions, DVDs, cameras, car sound, home theatre, computers, white goods, portable audio and a variety of music, games and movies.
The company has been able to grow its sales over the last 5 years in what can only be described as one of the most difficult trading conditions for retailers in over 20 years.
JBH’s strategies for growth are simple: increase the number of stores, increase sales, and through that, increase profit. JBH’s expansion is not only in the Australian market, but also in New Zealand. Since entering the New Zealand market in early 2007, it has opened 13 stores.
FY13 Results, Net profit of $116.4 million, up 11.2% on year, ahead of market consensus ($115.5 million) and its own guidance ($112-$116 million). Sales came in at $3.31 billion, up 6.3% on the prior year’s results. Comparables store sales did fall 0.5% over the year, but rose 3.5% in second half which is an encouraging sign.
The groups gross margin expanded by 43 basis points to 21.5% with Online sales growth of 29.8% and now represents 2% of overall sales. JBH’s balance sheet is in a healthy position, with the group’s gearing falling from 59.7% to 23.4% after its repaid $26.8 in borrowings. The company payed 72 cents of dividend for the year, up 10.8% on the prior corresponding period.
Growth Opportunities, 14 new stores to be opened in FY14 bringing total to 189 stores, Digital sales through online brand, NOW Music, NOW eBook Now Video. Continued roll out its HOME appliance brand, Online sales growth from soon to be launched HOME appliance website and new JB Hi-Fi websites.
JBH FY13 results were helped by the opening of new stores, but impresive nonetheless. The group has guided for sales growth of between 6-8% in FY14, which we think is more than achievable given the aforementioned growth opportunities.
Overall we think the JBH growth story has more to play out and this should continue to lead to share price appreciation.
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