JB Hi-Fi built their business as the destination for CDs, videos and audio gear. Today they’ve become a retailer of essential lifestyle gear, from the smartphone to the notebook to the essential appliances that people love to cook with, according to CEO Terry Smart, who admits that this change in consumer spending will drive future growth across both JB Hi-Fi and The Good Guys, even in an inflation hit market.
Yesterday the big retailer delivered an 8.6 per cent jump in first half sales to $5.3bn. Net profit for the half jumped 14.6 per cent to $330m.
With more than $9bn in annualised sales JB Hi-Fi is now in the big leagues of global electronic goods retailers, with brands clamouring to get their products ranged across their stores.
“On a per capita basis and taking into account that Australia only has a population of 26 million, this is impressive by any standards” said one supplier.
Smart claims that when they buy their essential home and tech gear the accessories follow, and this is good business for the retailer who is also seeing “ongoing demand” for European appliances and TVs at The Good Guys.
When asked about Samsung’s entry into the cooking category this year, he said, “It is always hard for any brand to enter an established category.”
Fundamental marketplace changes in consumer demand are also helping the retailer, according to Smart, with demand for a new generation of larger TVs driving customers back into stores.
He said that demand for larger TVs is driving sales at The Good Guys, along with demand for cooking appliances, with consumers heading to brands “They know and trust” said Smart.
After delivering another record result, he told ChannelNews that sales are starting to slow and this has created uncertainty for JB Hi-Fi management after sales softened in January.
“Customers are still spending more than they were at the same time last year, but are starting to become more cautious with their spending,” Smart said.
During the past week JB Hi-Fi and The Good Guys have witnessed strong demand for Galaxy S23 pre-orders, with consumers moving to trade ins as part of their purchase process.
A recent SmartHouse research study revealed that there is demand for an upgrade among owners of older Galaxy S20 and S21 Samsung smartphones, with the Galaxy S23+ appearing to be a targeted device over the S23 Ultra, which appears to be “too pricey” for a lot of consumers, in particular Galaxy S22 Ultra owners.
Few people doubted the quality of the Samsung product but some said they “just can’t afford it” due to inflation pressure.
Smart says the retail market will likely see more discounting as the year progresses, with management working to control inventory in line with demand, a move that could place pressure on suppliers.
Inventory at the big retailer is up seven per cent compared with 2019 which is seen as manageable, as sales have surged 32 per cent.
Comparable sales growth at the JB Hi-Fi Australia division fell from 8.5 per cent across the six months ended December to just 1.5 per cent in January.
At The Good Guys, growth went from 7.3 per cent in the December half to zero in January.
This is where JB Hi-Fi’s lean model is seen as being beneficial according to several suppliers, who claim the mass retailer has one of “The best management teams in the Country” when it comes to operating in a “tight” market”.
Suppliers claim JB’s flat management structure and their ruthless focus on costs and sales productivity will help them as Australians tighten their spending, and this is not necessarily good news for suppliers who will have to take the risk on supply.
Their relentless cost focus and hard bargaining with suppliers, coupled with their demands for incentive dollars, makes dealing with JB Hi-Fi a tough balancing game, according to one major distributor who sells millions of dollars’ worth of stock to the group.
Smart claims there is no massive trend shift in Australia’s retail sector, with consumers still investing in branded products.
He admits that consumers are becoming value-conscious, and that “discretionary” purchasing is also driving sales. As appliances or TVs break down they are being replaced with a better model or a branded model.
“The growth that we have been seeing in the first half is going to be harder to get in the second half, simply because we are cycling such a good second half last year,” Smart claims.
Image above: Nine Media shot by Eamon Gallager.
