JB trumps rivals, announces profit upgrade

By Chris Nicholls

MELBOURNE: JB Hi-Fi has trumped its rivals in the current gloomy retailing climate, announcing a rise in profit expectations at a time when its competitors are predicting worsening or even dire results.

The group’s predicted Net Profit After Tax (NPAT) is expected to rise 58 per cent on last financial year’s results to about $64 million, up from $40.4 million last financial year and up $4-7 million on its initial predictions for FY08.

Sales are expected to be lineball with earlier predictions, though, with a 40 per cent increase on FY07 to $1.8 billion. Comparable store sales growth for the 11 months to 31 may was 15.8 per cent.

Gross margin is expected to remain similar to last year’s despite JB Hi-Fi introducing further low-margin categories such as games and computers.

JB Hi-Fi chief executive Richard Uechtritz put the profit rise down to ever-decreasing costs of doing business, the company’s focus on technology and its “strong business model”.

“We have a very strong and resilient model in the right space. Australians’ love affair with technology is alive and well. Whilst consumers may be cutting back on furniture, fashion, eating out, that new renovation and holidays, interest in home entertainment remains strong and we are undoubted leaders in that space,” he said.

Uechtritz admitted things were tough, but said there were “a few things working our favour at the moment”, with JB Hi-Fi’s continued store growth, expanding product line varieties and reduced retail prices meaning continuing market share growth and offset any losses from dampened consumer sentiment.

“I think it’s margin control, it’s cost of business, it’s better buying, it’s a whole lot of little things. It’s new category growth, our model is pretty strong – it’s in shopping centres, it’s not destinational [sic] – maybe that’s helping people that don’t want to drive [long distance]. It’s a whole lot of little things that add up to the bigger picture,” he said.

Uechtritz said the upgrade announcement came after increasing pressure to disclose its financial position in light of rival stores floundering.

Clive Peeters and Rick Hart announced profit downgrades in the last two weeks, while Gerry Harvey admitted in mid-May that Harvey Norman’s results from January to June this year would be “nowhere near as good” as last year’s. Harvey Norman’s results for the 10 months to 30 April showed growth slowed from 16.8 per cent year-on-year for the 06-07 period to 10.1 per cent, with $4.8 billion in sales.

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