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COMMENT: Why Stock Is The Make Or Break Factor For Retailers

The latest JB Hi Fi results have revealed a big difference between the retailers who know how to run a business when adversity hits and those who think they know and are now hosing down fires of their own making or more so because they lack retail experience.

Take the Kogan management team, they are flat on the floor still trying to work out what hit them, when container loads of now ageing stock arrived that they did not have warehousing for.

They are also still trying to offload the stock before it becomes obsolescent, what someone needs to tell them it’s already too late.

A visit to the Kogan web site reveals the pain the business is going through with the same old specials still being pumped week in week out.

If there is one thing to come out of the JB Hi Fi results, it’s stock management with the last quarter set to be a litmus test for several retailers in the next reporting period.

While Kogan along with a few other discount retailers such as Jaycar are still facing stock control problems, the likes of JB Hi Fi the Good Guys and Harvey Norman appear to have managed stock control with these retailers now licking their wounds from going early on shifting stock at any cost as consumers returned to stores.

They took the pain of shifting old stock quickly as opposed to hoping it would sell over time.

What’s key now is having the space for new stock that will be in demand in the last quarter.

When you have stock time is not on your side, and those who thought they could shift stock over time, are now paying the price of marketing over time Vs taking a painful hit.Let’s go back 12-18 months when brands suddenly found themselves under pressure with parent Companies and manufacturers telling retailers that orders had to be placed 12 months out due to shipping, processor and manufacturing problems.

During this period retailers had to make tough decisions on stock levels which in some cases are now affecting the results of retail groups.

The inexperienced like Kogan and Temple and Webster are reeling, their shares have crashed, and they are desperately trying to work out What’s next especially when it comes to online trading.

The latest JB Hi Fi results revealed that online sales accounted for 17.6% of all group sales in FY22.

In the second half, despite all physical stores being open, online sales still represented nearly 12% of all sales which means they have got the measure of the online only CE and appliance retailers.

At JB Hi Fi ales in Australia during the last six months were underpinned by demand for consumer electronics and home appliance products.

Meanwhile, in New Zealand, total sales inched 0.3% higher to NZ$262.4 million from growth in visual, games hardware, and smart home categories.

As for the Good Guys they recorded a 2.7% improvement in sales to $2.79 billion. This was bolstered by key product categories such as laundry, portable appliances, floor care, and dishwashers with the business able to sell premium brands at a premium price.

JB Hi-Fi’s upbeat sales figures and its apparent lack of concern about the consumer demand cliff that economists and analysts have been warning about is because they have experienced management who know when to move and above all, what stock is needed to fuel growth as opposed to simply getting money back for stock that retailers such as Kogan have had to pay for up front.

JB Hi Fi and The Good Guys Group CEO Terry Smart has acknowledged that we are entering ‘an increasingly uncertain retail environment and households’ budgets (will) come under further pressure.’ But the overall sentiment is pretty positive. He is punting on new stock and above all a lot of brand-new products that brands are set to launch in the last quarter.

This includes new gaming machines, smartphones from the likes of Motorola Apple and Samsung along with several new smart home products that run on the new Matter platform.

While JB Hi Fi is sitting on higher stock levels it’s not the stale leftover stock sitting in their competitor’s warehouse or the likes of Kogan and Catch. It’s the stuff that the 96% of Australians that are still working have a salary still want to spend money on.

Smart claims that he is less concerned about the issues over which the JB management had no control.

He knows how much flexibility he has on ordering stock; he knows how much cost control leverage JB’s management has and how it can control most of the product pricing.

“We are an optimistic bunch. We plan category by category, and we believe that consumers are still spending” Smart said.

Which is why retail experience at the top pay’s dividends along with money in the bank.

Maybe Kogan needs to stop investing in new cars and houses for his family and while also trying to flog superanuation and insurance to concentrate more on the basics of retailing.

He does have an obligation to investors who have been left out in the cold with his experience being more back-end web sites and coding than simply retail management.



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