What JB Hi-Fi’s result says about Australian consumers’ buying frenzy

Are Australians stress-buying? How else can one reconcile consumer confidence being so weak that it barely has a pulse with shoppers out spending enough to push JB Hi-Fi Australia sales up almost 11 per cent in the three months to the end of June?

It is simplistic to suggest that JB Hi-Fi operates on a retail island. While the consumer electronics group regularly surprises – and sometimes astounds – by significantly beating profit expectations, its strong sales and a group profit result of more than 7 per cent also reflect broader consumer spending patterns.

Analysts have been patiently waiting for consumers to pair their spending with their sentiment, and the fact that JB beat consensus by 5 per cent suggests that the experts got the timing wrong, suffering premature pessimism.

The JB result may send analysts back to their models to massage the profit expectations for others in the discretionary retail sector. The market certainly had to make some adjustments. By mid-afternoon, JB’s share price had risen 3.5 per cent against a broader half a per cent fall on the Australian share market.

The official June retail sales numbers have not yet been released but commentary from retailers, and particularly in apparel, supports data from the ANZ that showed in the final weeks of June, consumers partook in a bout of binge shopping – part of which was clearly in response to the end of financial year sales.

Perhaps this represented the last gasp of frenzied retail shopping – some posit the strength in apparel sales was a post-lockdown response to the need to replace pyjamas with office clothes and outfits for social events.

But the statistics do show that June’s strong sales were not aberrant. Retail sales rose 0.9 per cent in May, the fifth straight month of growth and double market forecasts of a 0.4 per cent increase.

And JB Hi-Fi’s improvement in retail margins suggests that consumers were happy to wear higher prices.

The strength in retail is set against the backdrop of the Reserve Bank raising interest rates in May, June and July, and a sure bet that they will lift again in August.