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JB Hi-Fi Shares Slump 10% After The Good Guys Woes

Shares in JB Hi-Fi have dived 10% on market open, after the retailer slashed its fiscal year 2018 profit outlook, following weak quarterly performance from The Good Guys and intense market competition.

After falling to a five-month low of $23.06, shares in JB Hi-Fi have since lifted to a decline of ~8%.

The news comes as The Good Guys face eroding profit margins from its home appliances division, citing growing price competition in the segment.

Total group net profit is expected to be around $230 million, a 4.2% downgrade versus its previous guidance of $235 million – $240 million.

For Q3FY18, JB Hi-Fi posted a total sales growth of 6.8%, down from 10.8% the year prior. Comparable sales growth notched 4%, versus 8.2% for the same period last year.

Year to date total sales growth hit 9%, down from 11% last year. Comparable year to date sales growth reached 6.3%, down from 7.9%.

The Good Guys notched a Q3FY18 total sales growth of -1.3%, falling from 2.6% recorded last year. Comparable sales growth came in at -2.9%, versus 1.2% in 2017.

Year to date total sales growth for The Good Guys hit 1.2%, an improvement from 0.1% last year. Comparable year to date sales growth also improved, notching 0.3%, versus -0.9% in 2017.

The retail conglomerate jhas re-affirmed its FY18 sales guidance, with total group sales forecast to be ~$6.85 billion. JB Hi-Fi is forecast to contribute $4.75 billion, and The Good Guys $2.1 billion.

The group asserts JB Hi-Fi “continues to perform strongly” and “in line with expectations”.

The Good Guys claim performance has been “impacted by challenging conditions” specifically in their Home Appliance division,citing increased price competition and “unfavourable weather conditions”.

The retailer has pledged to increase sales and market share, despite the adversely impacted gross margins in 2HY18.

Whilst conditions in the Home Appliances market are expected to remain “challenging” in the short-term, the group remains “confident” in the medium and long-term outlook for both The Good Guys and JB Hi-Fi.

The group affirms it has the “lowest cost of doing business” (~15.5%) of all major Australian listed retailers and international CE retailers.

Gross margins remain ~22%, which the group asserts allows it to “compete effectively” against traditional competitors and new market entrants.

Concerning outlook for the next 12 months, JB Hi-Fi plans to further expand the following categories; PC gaming, connected home automation, communications, e-commerce platform migration and personalisation.

The Good Guys has endeavoured to increase its average selling price over the next 12 months, including growing sales, and improving both visual merchandising standards and delivery options.

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