JB Hi-Fi chairman and CEO comment on strong dollar and discounting

By Keri Algar

SYDNEY, NSW: In an address to shareholders JB Hi-Fi chairman Patrick Elliott and CEO Terry Smart, have said discounting will continue through the Christmas trading period, and they have explained why the strong Australian dollar impacts manufacturers more than retailers.

“The recent strengthening of the Australian dollar, particularly against the US dollar has also attracted a lot of comment. It is important to remind shareholders that the company buys from local subsidiaries of the off shore manufacturers, music and movie companies in Australian dollars. It is the manufacturer that takes the principal currency risk,” said Elliot.

“As all our major competitors buy locally for most items, fluctuations in currency do not impact our relative competitiveness. The challenge arises when a high local currency drives price deflation such that more units must be purchased, merchandised and sold to achieve the same gross profit dollars.

“Discounters generally appear to have fared better than their full price rivals in navigating the financial crisis as customers became increasingly more price conscious. Notwithstanding that the crisis for Australia has largely passed we would expect that the appeal of the discounter will be maintained. The consumer has been educated to look for a deal in most of their non food purchases.”

In his first AGM address as CEO, Smart said consumers could continue to expect discounts through the predicted strong Christmas trading period.

“Discounting has been a prevalent feature of retail over the last 12 months as consumer demand has softened. We are expecting to see discounting to continue through Christmas 2010 however JB is well positioned to maintain margins given its increase in scale, broad product assortment and everyday low prices strategy,” he said.

"The overall strength of the economy, low levels of unemployment and a strong product assortment should underpin a succesful Christmas trading period." 

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