JB chairman applauds success, has crack at retail rivals

By Patrick Avenell

JB Hi-Fi non-executive chairman and director Patrick Elliott has told investors that the Australian and New Zealand markets can support over 150 JB Hi-Fi stores, despite the current economic crisis.

Elliot was speaking today at JB Hi-Fi’s annual general meeting, where he also praised staff for enabling the retailer to post an impressive list of FY08 returns.

“In 2008 we saw: an increase in revenue of 43 per cent; an increase in net profit after tax of 61 per cent to $65.1 million; [and] an increase in earnings per share of 59 per cent to 61.8 cents,” said Elliott in his Chairman’s Address.

Primary in Elliott’s reasons for these figures was JB Hi-Fi’s business model, which revolves around low operating costs, the brand’s diverse retail offering, and an expansion in the number of JB HiFi-branded stores improving the company’s economies of scale.

“One of the key planks of our growth strategy has been geographic expansion…We continue to believe that the Australian/New Zealand market can support at least 150 JB Hi-Fi branded stores before creating any material cannibalisation of existing store operations,” said Elliott.

Elliott also made direct references to the potential threats faced by JB Hi-Fi’s competitors, claiming that the company’s specific business model, which is built on increased foot traffic through loss leading products like CDs and DVDs, will enable the retailer to continue thriving – potentially at the expense of the more traditional electrics stores, like Harvey Norman and Clive Peeters.

“JB remains unique amongst specialty retailers with its combination of hardware and software (music, movies and games). This combination makes it possible for the company to operate in shopping centres while many of our competitors remain in destination stores or bulky goods centres,” said Elliott.

He continued to speak about an issue recently in the news regarding Harvey Norman. The iconic Australian retailer was reported in the general media as being about the slash the company’s sizable advertising spend – one of the key factors that has made the chain a household name.

“The mix [as described above] also provides regular store foot traffic without the need to rely on heavy advertising,” he said.

There is no doubt that today’s announcements will have pleased JB Hi-Fi investors, and signs for the short-to-medium future appear positive. It is Elliott’s competitors who must now experience introspection, as the points he raises as to JB Hi-Fi’s success, in these times of increased insecurity, are all valid.

JB Hi-Fi was trading at $10.72, down three cents, just before 2:30 this afternoon.

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