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JB HI FI, New Store Layouts, House Brand TVs To Drive Future Growth

JB Hi Fi is looking to the future with new store layouts and instore merchandising being tested at a series of stores across Australia.

Suppliers are working with the mass retailer who yesterday reported that total sales came in at $7.1 billion, up 3.5 per cent.

Net profit rose 7.1 per cent to $249.8 million in the year ended June 30, above market expectations of $245 million.

Stores such as their Frankston operation in Victoria have been remodelled with brands contributing to new layouts for a new generation of consumer electronic products including Connected Home.

In some stores new instore merchandisers wrapped around a Google counter featuring voice activated speakers have started to appear, alongside these speakers are light bulbs security systems and connected devices. Missing from the same counter is networking gear which is still the essential technology for a connected home.

The Companies latest ruthless efficiency in delivering year in, year out results comes as retailers such as David Jones and Myer face a ‘death spiral’ with JB Hi Fi and the Good Guys stripping traditional appliance and TV business away from the department stores.

Also contributing to the improved results is a restructuring of the Companies house brand business spanning both The Good Guys and JB Hi Fi operations the dropping of the Soniq brand and the introduction of the all new FFalcon TV brand at JB Hi Fi and the UK Linsar brands at The Good Guys is expected to lift profitability at the two retailers this year.

Other areas that have been restructured to minimise risk while lifting profitability is across the Companies ‘Flea Market’ category with both Tempo and The Crest Company now working closely with two retailers to deliver efficiencies.

Shortly after the results were announced JB Hi Fi stock climbed 9.3% to over $30, previously the stock already had risen 30 per cent since the start of the year as other retailers faltered.

But it’s also important to consider Monday’s results with a bit of historical context.

In the past five years, JB H-Fi has lifted sales by 94 per cent and net profit by 83 per cent.

Over that period the group’s EBITDA margin rose from 6.57 per cent in the 2015 financial year to 7.24 per cent in the 2019 year.

What is starting to slip is margins from 21.86 per cent to 21.52 per cent.

The cost of doing business has risen from 15.25 per cent of sales to 15.47 per cent.

CEO Richard Murray rightly claimed this is a world-beating number, better than US giant Best Buy (where cost of doing business sits at 17.05 per cent), Germany’s Ceconomy (17.1 per cent), Japan’s Yamada Denki (24.1 per cent) and France’s FNAC Darly (25 per cent).

Only Britain’s Dixon Carphone (15.4 per cent) is better.

Murray says online sales rose 23 per cent to $258 million in JB Hi-Fi’s Australian division, to 5.5 per cent of total sales; JB Hi-Fi in New Zealand delivered similar sales growth and penetration figures, while The Good Guys chain saw a smaller lift in sales (3.7 per cent) but better penetration (6.1 per cent).

According to external sources the JB Hi Fi online site is now Australia’s #1 retailer with over 70M visits during the past six months.

The combination of a relatively limited offer from Amazon – both in terms of product availability and delivery – and improved online strategies from local players has created new competition for JB Hi Fi who are currently updating their site with new software and information capability.

Murray who likes to under promise and over-deliver, has proved the naysayers wrong and has seriously dented short sellers.

Murray says he believes JB Hi-Fi can continue to manage the juggle between productivity, sales and costs. He believes investments in JB Hi-Fi’s back-office systems, and continuing investment in supply chain improvements, will give the group some wriggle room to defend its margins should sales growth slow markedly.

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