JB Hi-Fi expects sales to grow by a third to $1.7 billion

By Martin Vedris

MELBOURNE: JB Hi-Fi CEO Richard Uechtritz has reported he expects sales to grow by 33 per cent to $1.7 billion in the 2008 financial year after comparative store sales growth continues to be in double-digit percentage figures.

Financial highlights reported at the company’s AGM include a 36 per cent increase in revenue to $1.3 billion, a 57 per cent increase in net profit after tax to $40.4 million and an increase in earnings per share of 55 per cent to 38.8 cents. The company also reported that total dividends relating to the 2007 year increased by 45 per cent from 7.6 cents per share to 11.0 cents per share.

Also at the AGM, shareholders voted in favour on proposals to increase directors’ fees from $400,000 to $600,000 and grant options to directors Richard Richard Uechtritz, CEO, and Terry Smart, Executive Director.

In his presentation to shareholders, Uechtritz commented on current trading and hinted at a strong December sales period.

"Current trading has continued to be strong, in line with that experienced in the second half of last financial year," stated Uechtritz.

"December remains a key trading period given the increasing skew of our product mix to gift related categories and will be the major determinant as to whether the momentum in the early part of the year is reflected in the 2008 full year result."

Uechtritz also commented on the number of new stores opened and yet to be opened by the group.

“By Christmas this year we will have opened 15 new stores since 1 July, including 13 JB Hi-Fi stores and two Clive Anthonys stores, taking the total group store network to 104. This will include eight Clive Anthony stores and 11 Hill & Stewart stores.

“The property pipeline remains solid with about five additional stores to be opened in the second half of 07/08. The 20 stores to open this year will be the biggest number of new stores that the company has opened in any year, which will help ensure its continued strong growth. We expect sales in FY08 of circa $1.7 billion or a 33 per cent increase.”

In his address to shareholders, Patrick Elliott, chairman and executive director of Next Capital Pty Limited, a private equity manager, pointed to cost reduction as a core reason for the company’s financial success.

“The company’s strategy has been and continues to be very consistent. Every day we look for ways to build upon our competitive advantage as one of the lowest, if not the lowest, operating cost bases in the industry so that we are able to deliver a broad range of technology and entertainment products at every day low prices.

“For the year ended 30 June 2007 our cost of doing business was 16 per cent, a significant improvement from 17.1 per cent the previous year. This was achieved by JB’s unique product merchandising, mix and branding that drives very high levels of store productivity.

“This cost advantage is reinforced by increasing store sales and the new store roll out that improves our economies of scale in buying (product, advertising and services); an appropriate application of technology and training to improve labour productivity without impacting customer service levels.

“Lower operating costs have enabled the Company to improve profit margins whilst managing in a lower gross margin environment. Lower gross margins continue to results from a shift in product mix to lower margin products as well as strong levels of price competition.”

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