Despite a great performance, many were scratching their heads at the significant decline in the JB Hi-Fi share price over the last 24 hours.

The JB Hi-Fi share price has increased by more than 60% over the last year and increased by 30% from February 2023 to February 2024, so you can cut them a bit of slack for dropping back a bit yesterday and today from a record price of $108. The drop relates to what might happen in the future, rather than a lack of performance up until now.

Here are a few reasons…

Comps: A number of analysts on the call yesterday discussed something called ‘comps’ or comparable performance marks which are comparable numbers that JB Hi-Fi seeks to meet or beat in each half-year reporting season. Higher comps will need to be achieved in the six months ending 30 June. The ‘comps’ that worried some of the analysts revolved around gross margins and potential future competitive activity.

Competitive Activity: JB Hi-Fi CEO Terry Smart corrected himself when describing competitive activity in the market as initially “aggressive on-floor discounting impacting gross margin” and then described the activity as more like the behaviour in the category prior to Covid. This brought into focus the role of staff to close (or lose) a sale.

Take The Deal: Smart was clear in his commentary about the importance of staff ‘taking the deal’ with a customer to prevent them from going anywhere else.

“When a customer is standing in front of the salesperson, we need to take the deal. They might have got a price down the road from a competitor and we just need to take the deal.” Analysts feel that this deal-making may erode margins for the sake of top line sales – but this mantra maintains JB customers and sales at the end of the day which is also significant.

Share Price: Analysts are questioning whether the business can continue to hit its ‘comps’ on a year on year basis in light of the competitive environment. The share price has also been trading at multiples of 22x higher than the consumer sector on average (18x) and higher than the company has traditionally traded (13x).

Additional unknowns include how other retailers have been performing in the sector (Harvey Norman has yet to release its numbers) as well as next Tuesday’s expected interest rate cut, an expected slowdown in spending around a Federal election (why – nobody knows) and higher prices due to a weak Australian dollar that may flow through as soon as 1 March.