JB HI-FI Limited (ASX: JBH) is one of Australia’s largest retailers that sells and specialises in consumer goods. JB offers an extensive range of products including technology products, home entertainment and home appliances. JB has a market capitalisation of A$2.7 billion.
What are the key features of JB’s trading update?
Total sales growth for JB Australia (2H20 to date) increased by 20%. Total sales growth for JB New Zealand (2H20 to date) fell 19.3%. Total sales growth for The Good Guys (2H20 to date) increased by 23.5%.
The JB Group has observed strong total sales growth in JB Australia and The Good Guys during 2H20. The main driver of this strong sales performance has been an increase in demand of household goods as economic agents are spending more time working, learning and enjoying entertainment at home.
However, JB New Zealand has observed a sharp decline in total sales growth. The main driver of this performance is due to the New Zealand Government’s COVID-19 restrictions, that caused a temporary closure of JB stores. Currently, JB New Zealand has resumed full trading. JB will also be conducting a review of JB New Zealand assets due to the ongoing challenging performance and expected continuing uncertainty in the New Zealand market. This review is expected to result in a non-cash impairment in JB HI-FI New Zealand of approximately A$25 million (post tax) in FY20.
What is the outlook for JB?
The Group previously withdrew its FY20 sales and earnings guidance as a result of the uncertainty arising from COVID-19. However, due to the strong sales performance and assuming no significant changes to trading performance or customer shopping patterns during June the group has provided an update of FY20 guidance.
Total sales to be $7.86 billion. This includes JB Australia with $5.26 billion, JB New Zealand (NZD) with $0.22 billion and The Good Guys with $2.39 billion.
Total net profit after tax after New Zealand impairment (mentioned previously) is to be in the range of $300 million to $305 million, an increase of 20% to 22%.
JB continues to see strong momentum within the Australian market through the half year. In the past two months, both JB and The Good Guys have seen an acceleration of sales as patrons are purchasing essential products that they need to respond for COVID-19. More specifically, patrons are purchasing an influx of technology products that enable remote working, learning and communication devices, and essential home appliances for food storage and preparation.
What is the market reaction?
The market reaction to JB’s announcement is neutral. JB’s share price is down around 2% and is currently trading at A$41.71. However, the Australian market is down around 2%, so this result is in line with the market. JB has a forward P/E ratio in the mid-teens and an annual dividend yield of around 3.4%.
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
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