By Patrick Avenell

JB Hi-Fi’s positive sales and net profit result for the 2013 financial year came despite down-trend pressure on shopping centre-based stores, which are being hit hard by the current lows in consumer confidence, according to analysis by Credit Suisse’s retail expert Grant Saligari.

“The result demonstrated that the sales environment was marginally better, but still below underlying cost inflation,” Saligari said. “JB Hi-Fi branded stores delivered 3.5 per cent comparable store sales growth in 2H13.

“Sales growth appeared to be consistent in the third and fourth quarters of the year. The comparable store figure includes a contribution from online, expansion into the commercial segment and from JB Home branded stores open for more than one year.

“It is likely that JBH gained market share during 2H13 due to the collapse of Retravision. That market share shift will be cycled from 3Q14.”

Saligari said JB Hi-Fi is struggling to remain relevant in its software divisions, which includes music CDs, film and TV DVDs and video games. These sales have moved to online channels and will not be returning to bricks and mortar outlets.

Looking specifically at the JB Home appliance offering, Saligari said it was unlikely that these stores were being run at anything more than breakeven.

“The company is signalling incremental sales from the Home format of $3-to-5 million per annum — that benchmark is low for a whitegoods specialist, but could be profitable as an adjacency to a JB Hi-Fi store.

“At present, JB Hi-Fi is prepared to operate JB Home stores at breakeven.”

Saligari further said that increased sales following the demise of Retravision “will not be repeated” during the 2014 financial year.

Credit Suisse has labelled JB Hi-Fi ‘Underperforming’ in its communications with investors.

Strong JB Hi-Fi profit result despite decline in media, gaming sales

By Patrick Avenell

JB Hi-Fi has reported very strong results for the 2013 financial year: net profit after tax up 11.2 per cent to $116 million and total sales up 5.8 per cent to $3.31 billion.

“It was pleasing to see positive sales momentum maintained throughout the second half of FY2013, with the company seeing positive comparable sales of 3.2 per cent and total sales growth of 10.3 per cent,” said CEO Terry Smart, reflecting on trading during the first half of calendar 2013.

“Improved gross margins, ongoing cost control and our emphasis on high levels of customer service all contributed to a solid overall result.”
JB Hi-Fi continued its store rollout program during FY2013, opening 13 new stores and closing three others, to finish the financial year at 176. Smart said the company maintains it previously stated ideal number of 214 stores.

“New stores continue to perform well as our focus on high foot traffic locations ensures maximum exposure and convenience for customers,” he said.

“We continue to evolve and innovate our model, ensuring we not only remain relevant to our existing customers but gain new sales opportunities for now and into the future.”

Smart predicts sales growth of 6-to-8 per cent over the coming financial year.

Also coming in the new year is a new website, which will create a seamless online channel across multiple devices.

“A new JB Hi-Fi website will be launched in the first half of FY2014, which will enhance the customer experience via improved search functionality and richer product information, ensuring the company can deliver its goal of a seamless customer service experience regardless of how consumers wish to shop with JB Hi-Fi.”

JB’s annual report reveals that sales of its traditional profit base; music, movies and games; has declined — 2.8 per cent year-on-year — but a much more significant 8.9 per cent in comparable terms. These three categories make up 21.5 per cent of all sales at the retailer. Based on the figures provided in JB’s annual report, this was an $18.9 million decline in real money terms.

To offset the overall industry decline in these categories, JB launched its NOW music streaming service, which has around 20,000 paid subscribers, according to the report. At the $8.25 per month card rate, this equates to just under $2 million revenue per year.

JB Hi-Fi is further broadening its sales by expanding rapidly into home appliances, the telco industry, commercial sales, e-books and digital video sales.

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