Yesterday morning JB HI-FI (JBH), the local electronics and home appliance retailer provider, delivered a strong full year result despite what was thought to be a tough economic environment. The core and income Portfolios have a 3% weight to JBH.

  • Record Sales: JB HI-FI recorded their highest full year revenue with their top line growing by +4% to $9.6 billion, driven by JB HI-FI Australia which had total sales up by +5.6% supported by communications, audio, accessories, games hardware and services growth. JB HI-FI in New Zealand also saw their top line grow by +10% over the year driven by communications, audio, fitness and Accessories.
  • Good Guys: Sales increased by +1% to $2.8 billion driven by key growth areas in Refrigeration, Laundry, Floorcare and Personal Care. Good guys gross profit margin grew slightly to 23.4%, driven by positive sales mix, with earnings falling to $213 million driven by increased depreciation on fixed assets.
  • Dividends Slightly Down: The full year fully franked dividend for JB HI-FI was $3.12, down 4 cents or -1%. A great result in tougher economic conditions.
  • No Debt: JBH continues to have one of the best balance sheets with a net positive cash position of $177 million.
  • Outlook: Management did provide a sales update of the month of July with JB HI-FI Australian sales down 2% and The Good Guys sales down 12%, but management maintain that it is in line with the group expectations and cycling through the elevated period from last year.

Portfolio Strategy: JBH’s business model is based on low prices and low overheads but high volumes. In terms of 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 whitegoods has proved very successful. JBH continues to look cheap, trading on a PE of 12x with a 6% fully franked yield. This result indicates to us that JBH is increasing its market share.

JB HI-FI finished up +2.8% to $48.51, a great result on a negative day on the ASX.