JB Hi-Fi posts solid results thanks to hardware and appliance sales

JB Hi-Fi has given investors the good news it promised last week with the retailer announcing strong half-yearly sales and profit results.

The company announced $1.94 billion in total sales for the six months to 31 December 2013 — a year-on-year increase of 6.8 per cent — and a 10 per cent increase in net profit after tax (NPAT) up from $82.1 million last year to $90.3 million this year. Comparable sales growth was up 2.8 per cent, while both gross margin and cost of doing business climbed slightly to 21.6 per cent (HY13: 21.5 per cent) and 13.9 per cent (HY13: 13.8 per cent) respectively.

The company ended the calendar year with 182 JB Hi-Fi stores after opening 5 new JB stores and 1 new JB Hi-Fi Home store, while 7 existing stores were converted to the Home format, and the last Clive Anthonys store in Australia was closed.

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The Home concept stores were labelled a “growth driver” by the company, with newly-converted stores achieving comparable store sales of 13.6 per cent in the six months (post conversion). JB stuck by its previously stated forecast of having approximately 50 Home stores by the end of the 2016 financial year; Home stores numbered 16 at the end of 2013 with 22 stores expected to be open by the end of this financial year.

The investment in the appliance-based stores makes sense based on the company’s comments in its results presentation:

Results to date support annualised incremental sales per store of circa $3 million in Year 1, increasing to $5 million in Year 2, with the longer term sales opportunity still to be fully quantified.

In the ‘Hardware’ category (defined as product sales excluding music, movies and games software), total sales were up 11 per cent and comparable sales climbed 6.6 per cent, “driven by growth across the majority of categories including visual” according to the company.

However, total software sales (including the aforementioned music, movies and games) were down 7.9 per cent (down 11.3 per cent on a comparable basis).

JB Hi-Fi also noted the positive results from its ‘Out of Store’ business (including the brand’s established online transactional website and its burgeoning digital content streaming service JB NOW), saying both services helped to complement the retailer’s bricks and mortar presence and strong brand.

While JB didn’t share figures for its digital business (only commenting that “we need to stay relevant and follow consumers’ present and future content consumption behaviour”) it noted a 15.4 per cent increase year-on-year in online sales, now accounting for $42.9 million or 2.2 per cent of total sales. Unique visitors were up 17.8 per cent and the companies ‘Home’ categories (i.e. appliances) were called out as a “sales growth opportunity”.

The strength of the JB Hi-Fi brand was also highlighted by JB Hi-Fi CEO Terry Smart in his comments on the half-yearly results:

We are very pleased with the results for the half year which again highlight JB Hi-Fi’s ability to continually leverage the power of the brand and adapt to the ever changing retail landscape.

We have seen positive comparable sales across the majority of our hardware categories, the successfull introduction of home appliances and strong growth in our commercial division. Gross margins also improved and costs continued to be well controlled, all contributing to solid NPAT [net profit after tax] growth for the half year.

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