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CE & Appliance Brands Set To Be Pressured To Cut Prices

JB Hi Fi shares soared yesterday, despite the Labor Government and Workplace Relations Minister Tony Burke bringing in new laws that could cripple small business going forward, the move comes as retailers look for new discounts from suppliers.

Terry Smart the CEO of JB Hi Fi Australia’s most successful CE and appliance retailer has described as “crazy” Government plans to give employees the right to switch off their devices to calls from their employees and staff.

Smart questioned the need for the new right to disconnect provisions giving workers the right to ignore unreasonable after-hour contact from their employers.

“It does look crazy that we need legislation to control what should be a commonsense issue,” he said. “But we are a seven-day-a-week business, and I’m confident our teams manage that well as it stands … I don’t hold too many concerns, but yes, there is always potential for this to have an impact on our business.”

Smart and the management team yesterday delivered a result that sent the stock to $60.58 up over 7% on the day, the big question now is what about the next two quarters.

He claims that the market is shopping for bargains and that the next 12 months could be about “affordable bargains”.

The retailer reported total sales of $5.16 billion for the 6 months ending 31 December 2023 up 0.7%

Earnings before interest and tax (EBIT) was $386.7 million; net profit after tax came in at $264.3 million a fall of 20%.

The battle is set to be between suppliers and retailers with several brands still trying to get price increases despite falling manufacturing costs and a slump in shipping costs.

Retailers want discounts in an effort to lure consumers into their stores.

Prices rises introduced during COVID have not been reduced across several categories with concerns that CE and appliances could contribute to further inflation pressures.

Coles has already asked some of its suppliers to cut their prices to reflect cooling inflation, with those savings likely to fund a discounting blitz.

Shipping Company A.P. Moller-Maerskare who lifted the cost of a 40-foot container during COVID to over $14,000 up from $3,500 is now struggling with shares in the business plummeting as much as 18% last week after the shipping giant forecast a profit drop of up to 90% for 2024.

The problem that is a massive plus for European CE and appliance suppliers is a looming wave of new freight capacity poised to enter the world’s shipping lanes.

Currently the main factor pushing up shipping rates and shares—the Houthi attacks on Red Sea shipping, which is forcing ships to take longer routes to get goods to Australia.

Retailers such as JB Hi Fi are under pressure offer improved discounts to secure sales, this is coming at the cost of profit margins with brands now being asked to slash costs.

“It is on-floor discounting, so it is when a customer comes, and we negotiate on price, and we have seen a lot more on-floor discounting, we have seen it increase, and it is returning back to much more a pre-Covid base,” Mr Smart told The Australian on Monday.

“Consumers are very focused on getting good value, and they are pushing harder, that’s how we operate, that’s what we do, and we want to get the sale, and we will negotiate with the customer and do everything we can to secure that sale.”

Jarden analyst Ben Gilbert described the JB Hi-Fi result as “another strong, clean result” that highlighted the quality of execution.

“We would expect consensus to come up mid-high single digit at the earnings before interest line, following the stronger result and better.

trading update given comparative sales begin to get easier through the second half of fiscal 2024.

“The above said, we think there is a lot in the share price at current levels. We also see positive read-throughs for Harvey Norman given stronger The Good Guys margins.”

UBS analyst Shaun Cousins said JB Hi-Fi was showing greater resilience than currently forecast.

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