COMMENT: What is Next For JB Hi Fi Under Smart?
The JB Hi Fi management team have been credited with being among the best there is out there, when it comes to managing a retail chain, but after today’s exit of Group CEO Richard Murray an 18-year veteran at the Melbourne based retailer changes could come, fast and furiously as Terry Smart takes the helm.
Smart is a veteran retailer who was talked back into the business to take on the role of CEO of The JB Hi Fi owned chain, The Good Guys, by Richard Uechtritz current board member and founder of JB Hi Fi, he is also a business partner with Smart in other businesses.
In the early days of JB Hi Fi, Smart was the CFO and Uechtritz the CEO at the big CE retailer.
The business grew with people like Scott Browning the former Marketing Director, providing the creative marketing around the “handwritten” brand image that JB Hi Fi still has in place today.
So, what’s the future of the business under Smart? Who will take over at The Good Guys and will JB Hi Fi still stay in the NARTA buying group after Smart refused to use the group when he took over at TGG?
While current JB Hi Fi CEO Cameron Trainor is a big supporter of Narta, Smart believes the group is big enough now to handle there own buying.
One of the logical contenders for the CEO role at TGG is Biag Capasso the current Merchandising Director.
Cameron Trainer was the Merchandising Director at JB Hi Fi when he got the nod to take the top job at JB hi Fi.
Another contender could be an outsider Bruce Thierbach the General Manager at Melbourne based distributor Audio Active a Company that is owned by the Bouris family, who are the founders of the original five store JB Hi Fi.
Thierbach the former General Manager at JB Hi Fi spent 21 years with the retailer before leaving three years ago.
Then there is the question of whether any of the current management will follow Richard Murray out the door to join him in his new role running Premier Investments retail division.
Some observers claim Murray has been hired to build a team that can have a crack at taking over Myer.
Premier Investments biggest shareholder Solomon Lew has a white-hot desire to own Myer and Murray has the experience to deliver a team that could run the struggling department store group, Lew is also a major shareholder in Myer.
According to Nine Media it t was at a dinner party thrown by a mutual friend that billionaire retailer Solomon Lew met Richard Murray in the final months of 2019.
It’s now emerged that after that initial dinner meeting, Lew and Murray met a couple of times socially but it was Prime Minister Scott Morrison’s invitation to a meeting at Kirribilli House that the men came together last year. As part of a group of 10 senior business leaders called to advise on the COVID fallout, Murray and Lew were joined by others including Wesfarmers chief Rob Scott, the Commonwealth Bank boss Matt Comyn and Coca-Cola Amatil chair Ilana Atlas.
Watching Murray in action was enough for Lew to decide this was a connection worth fostering and the pair have stayed in touch over the past year.
Murray will receive a base salary of $2 million at Premier, a hefty boost from the $1.35 million he received at JB Hi-Fi in the year ended last June 30.
His short-term bonus will be equivalent to between 37.5 per cent and 75 per cent of his fixed remuneration (subject to yet-to-be-determined performance hurdles) with up to 600,000 performance rights available as a long-term incentive.
Perhaps most notably, Premier will grant Murray 200,000 performance rights as a sign-on bonus, to be awarded in equal tranches over the next four years.
While Premier did not disclose the strike-price of the performance rights, with Premier trading at $25.89, the rights could be worth as much as $5.2 million.
Around the water coolers and in offices at JB Hi Fi the big chatter is all about the future.Has JB Hi Fi peaked, what will Smart do next?
At TGG Smart, had three clear goals when he took over and he has achieved them.
He cleared up the mess left behind by former CEO Michael Ford, he did this by cleaning out dead stock, engaging with brands and refinancing the business.
He then set out to reenergise the management team introducing new instore merchandising and turning The Good Guys into a house of brands. He even took senior staff from JB Hi Fi to bolster the TGG team.
The last 12 months results reveal how successful this strategy has been.
He also moved to turn TGG into a house of brands.
On the other hand, CEO Cameron Trainor has grown JB Hi Fi based on an FMCG model.
A former supermarket executive and merchandising director Trainor has been front and centre of JB, Hi Fi’s growth now questions are being raised as to whether the future for JB Hi Fi is FMCG.
Or do they have to invest further in online, new categories and develop a service model allowing them to generate end to end revenue streams.
The fast-moving-consumer-goods industry which JB Hi Fi has developed has a long history of generating reliable growth through mass brands.
But the model that fuelled industry success now faces great pressure as consumer behaviours shift and the channel landscape changes.
To win in the coming decades, FMCGs need to reduce their reliance on mass brands and offline mass channels and embrace an agile operating model focused on brand relevance rather than synergies.
This is just one element that Smart recognised when he took over the helm at TGG.
There are also questions as to whether Smart will keep the advisors that Murray built around him going forward? Will the JB Hi Fi model stay the same?
During the Smart, Uechtritz era, a decision was made to ditch premium Hi Fi speakers from showroom floors at JB Hi Fi stores. They were replaced with Apple computers PC’s and accessories.
The cash flow turnaround was instant, and the business grew in double digits so did their store count.
Some analysts believe JB Hi Fi will have no alternative to buy into new businesses, are they a contender to buy the likes of Boost Mobile and further cement Telstra’s reliance on the big retailer.
Questions are also being asked as to what will happen to the streams of marketing, CO-OP and merchandising revenue from brands, many who are working hard to drive revenue to their own sites as opposed to handing over big dollars to JB Hi Fi.
During the next few months we will get a better feel of where the future is for one of Australia’s most succesful retailers both in store and online.