JB Hi-Fi sees sales softening after double-digit profit jump

In an announcement to the ASX on Monday, JB Hi-Fi said that its net profit had climbed 14.6 per cent to $330 million in the six months to December. Revenue lifted 8.6 per cent to $5.3 billion as demand for key categories, including communications, audio, accessories, computers and fitness, drove growth for the business.

Sales growth for JB Hi-Fi’s New Zealand division, which accounts for 5 per cent of total sales, shot up 20 per cent in the first month of the year. That growth didn’t offset its much larger Australian operations which slowed to just 2.5 per cent, compared with 4.3 per cent in January 2022. Sales at its subsidiary, The Good Guys, which make up 29 per cent of the group’s earnings, were flat.

MST Marquee senior research analyst Craig Woolford said JB Hi-Fi’s latest data showed a meaningful slowdown in sales growth, and that the market was expecting the group’s Australian sales to drop 5 per cent in the second half. While the increase in profit margins was a “very strong result,” JB Hi-Fi’s operating costs including sales and marketing expenses had tempered its performance, he said.

As interest rates rise, there are indications consumers are pulling back spending. Household goods retailing, which includes electronic goods and appliances, fell 7.8 per cent in December according to the Bureau of Statistics.

Despite bucking the trend in December, Smart said the slowdown in the company’s Australian operations this year could continue if customers continue to tighten their wallets.

Overall sales in the second half last year climbed 8.6 per cent to $5.3 billion on the back of promotional periods including Black Friday and Boxing Day in what Smart described as a normalisation of trading conditions following two years of COVID-related disruptions.

The $4.9 billion company lifted its interim dividend by 20.9 per cent to $1.97 a share.

Compared to before the pandemic, JB Hi-Fi’s online sales have more than doubled, and total sales are up 31.8 per cent. But they have fallen short of their peaks during COVID-19. In the six months December 2021, online purchases soared 63 per cent to $1.1 billion or 22.7 per cent of the company’s total sales. That fell to $537.3 million, or 15 per cent of total sales, in the latest half. Data from the ABS shows total online sales across the nation’s retailers broadly fell 5.7 per cent in December.

Smart also said the business had a “reasonably high number of casual staff” which weighed on costs, but that it would continue to prioritise delivering strong customer service over consideration of staff cuts. And he was confident about keeping costs growth in check as suppliers match retailers in their fight for market share.