This morning, JB HI-FI (JBH), the local electronics and home appliance retailer provider, delivered a strong half-year result that was ahead of market expectations despite what was thought to be a tough economic environment. The Portfolios have a 2.5% weight to JBH.

Key Points:

  • Profits Lower: JB Hi-Fi recorded its second-highest first-half revenue, with its top line falling by 2% to $5.2 billion as they cycled a record first half last year. Revenue was underpinned by JB Hi-Fi Australia, which saw revenue growth of +1% to $3.6 billion driven by Mobile Phones, Games Hardware and Small Appliances. Good Guys’ revenue fell 10% to $1.39 billion, but its dominant home appliance categories remained resilient throughout the half.
  • Superior Cost-Saving Strategy: JB Hi-Fi has been able to maintain its EBITDA margins by being able to flex its labour costs throughout the half. JB Hi-Fi Australia saw costs only rise by 5.2%, while The Good Guys’ saw costs only rise by 3.1% during the half, which is very impressive when there was a 5.75% increase to the minimum award wage in 2023.
  • Dividends Down: The half-year fully franked dividend for JB Hi-Fi was $1.58, down 20% as JB Hi-Fi looks to hold onto cash as it is the seasonal high for them after Christmas shopping and look to deploy that cash throughout the year or return the cash to shareholders at the full-year result.
  • No Debt: JBH continues to have one of the best balance sheets on the ASX, with a net positive cash position of $488 million.
  • Outlook: Management did not provide direct guidance for the second half of 2024 but did provide a trading update for January, which saw JB Hi-Fi Australia sales increase by 2.5%, JB Hi-Fi NZ sales increase by 8%, but Good Guys sales fell by 2% cycling a high-demand month.

Portfolio Strategy: JBH’s business model is based on low prices, low overheads, and high volumes. Regarding the cost of doing business (rent, administration and sales staff costs), divided by sales – JBH is one of the most efficient retailers globally, a remarkable outcome given Australia’s high wages and is Australia’s largest electrical retailer and the world’s seventh-largest electrical retailer. More importantly,  JBH has consistently recognised declining (CDs) and growing (fitness devices) categories and switched inventory to take advantage of these shifts; the expansion into Home and white goods has proved very successful. JBH continues to look cheap, trading on a PE of 16x with a 4.2% fully franked yield. This result indicates to us that JBH is increasing its market share.

JB HI-FI finished up 7% to $60.58, following a strong result.