If there’s one stock on the ASX that keeps on giving, it would have to be JB Hi-Fi. It’s one of the only retailers that is defying the doom and gloom surrounding the sector, defying the the Amazon threat and pumping out record result time after time. Australian’s just love the yellow brand, its warehouse styled stores and its discounted products.  This year the electronics retailer posted a whopping 41% increase in revenue and its profit was up 37% to $151.1m which beat an expected $150m. I mean it’s not hard to see why. During 24 hour Christmas trading period, JBH was the only store at Chadstone shopping centre with a +200 strong line that ran well outside the store. You don’t need to see numbers to gauge its success. Just walk into a store. They’re always packed.

Here are the numbers:

  • Revenue was up 41.04% to $3.689bn.
  • Profit was up 37.40% to $151.7m.
  • Final dividend was 46c.
  • EBITDA came in at $256.3m.
  • Total sales up 41.0% to $3.7 billion
  • NPAT of $151.7m up up 37.4% on statutory NPAT in the pcp
  • EPS up 13.7% to 132.2 cps.
  • Total sales grew by 10.8% to $2.48bn with comparable sales up 7.8%.

The Good Guys posted a total sales increase of 2.4% with comparable sales up 1.8%. Key growth categories were Seasonal Products, Cooking, Communications, Visual and Dishwashers. Online sales for the period were down 1.7% to $72.7m or 6.6% of total sales.

Outlook

The company issued a January 2018 sales update. Total sales growth for JB HI-FI was 6.9% (January 2017: 9.8%) with comparable sales growth of 4.5% (January 2017: 7.2%) and total sales growth for The Good Guys was -3.5% (January 2017: 5.0%) with comparable sales growth of -4.7% (January 2017: 3.5%). The Good Guys sales growth pulled back a little due to cycling strong sales of Seasonal products (Air Conditioning) in the pcp.

Guidance

The company expects to focus on sales and market share, and continuing changes to sales mix, to result in sales growth exceeding gross profit dollar growth.

  • Total Group sales are expected to hit $6.85bn (JB HI-FI $4.75bn and The Good Guys $2.1bn)
  • Total Group NPAT to be in the range of $235m to $240m an increase of 13.1% to 15.5% on underlying NPAT in the pcp.

The highly anticipated Amazon threat had little to no bearing on JBH. In-fact JBH were ready and waiting. JBH responded to the Amazon threat by beefing up its online store and delivery times and offering  tech support and repairs, which Amazon cannot match. Well played JB. The Aussie retailer always packs a punch and this time around it lived up expectation. Prior to the recent share market correction, shares were hitting 12 month highs. With this bumper result we expect this trend to continue. JBH shares should open in the positive despite a soft open on the ASX this morning. You can also expect this bullish momentum to gather pace as shorters will be caught out and look to scramble to cover.

In the lead up to these results, brokers were out upgrading recommendations and target prices following a bumper Christmas trading period. JBH took advantage in a rebound in consumer confidence and spending by putting up a strong defence against the Amazon threat. FY sales guidance was increased following a better than expected but some analysts are saying it was slightly below current consensus of $241.9m. We like the JBH story and believe it’s by and far the leader of the retail bunch. It’s a buy. If shares are hit today, it can only be because of its guidance. Any fall is a buying opportunity.

Update 1pm – The JBH share price is down some 7%. After a bit of digging, the negative market reaction looks to be due to the company’s outlook statement. The guidance for

  • Total Group NPAT to be in the range of $235m to $240m an increase of 13.1% to 15.5% on underlying NPAT in the pcp which was 3% lower that the market was expecting.
  • Gross profit margins fell 20 basis points.

seems to have disappointed investors. The Good Guys business is tracking a little under par. Sales fell 4.7% in January. It contributes 30% of revenue for the overall business. Whilst both are partly negative, the overall result was a good one. We are a little surprised at the share price fall which could have been exacerbated by shorters. These numbers were strong and we reiterate our call. For a rather small guidance miss, a 7% share price fall is well overdone.