With the Australian dollar at a two-month high against the US dollar, coupled with an expectation for long-overdue rate cuts to be announced by the Reserve Bank of Australia tomorrow, key retail stocks including that of JB Hi-Fi, Temple & Webster and Audinate are on the rise.
JB Hi-Fi’s share price has been delivering outstanding results and has risen more than 56% in the last 12 months. It is up more than 10% in the last month itself and is now trading at around the $101.65 mark.
Recently, JB Hi-Fi Group which owns The Good Guys as well as E&S, reported better-than-expected sales growth of nearly 10% for the six months to December 31. JB Hi-Fi sales rose to $5.67 billion, while net profit rose 8% to $285.4 million.
JB Hi-Fi operates about 225 stores in Australia and New Zealand. New Zealand sales surged 20%, and same-store sales in Australia – which excludes newly opened ones – grew by 7.2%.
Online-only retailer Temple & Webster has also seen its shares surge on the ASX over the last few weeks. Its revenue for the December half rose 24% to $313.71 million as net profit increased 118% to $8.98 million. No dividend was declared, allowing it hold a cash balance of $139 million along with no debt at the end of the half.
In the last one month, Temple & Webster’s share price has increased more than 36%, and its stock has climbed more than 55% in the last year to currently trade at around $17.89. It hit a record high of $18.11 last week.
Founded in 2011, chief executive Mark Coulter has said he is contemplating expanding the online platform beyond Australia for the first time.
Analysts are struggling to explain Temple & Webster’s rise. UBS has cut the rating of Temple & Webster from neutral to sell, saying the share price gain looked overdone given its earnings and trading update.
“We cannot justify the current valuation,” said Tim Piper, an analyst at UBS, according to the Australian Financial Review
“With BAU marketing already above the top end of 12-13 % guide, there is a risk that accelerating top-line growth in 2H comes at a greater cost than the market has now priced in,” said Piper.
Another company which has seen its share price rising rapidly is digital audio company Audinate whose share price climbed more than 27% in early trade on Monday following the release of first-half results.
Gross profit of $US16 million (A$25.14 million) was down 29% on the $US22 million (A$34.56 million) recorded in the prior corresponding period, but margins improved to 8%, up from 72% in the first half of financial year 2024.
Audinate said that it was overstocked with its physical supply of chips, cards, and modules (CCM), resulting in a 55% dip in revenue from those products. But, it added that a 13% rise in software revenue meant underlying growth is strong.
The company’s CEO and co-founder Aidan Williams said: “Although the first half was impacted by excess inventory in the OEM channel, we remain confident in the fundamental strength of our business model. We continue to invest in our market-leading audio business, expanding our installed product base and manufacturer partnerships. Additionally, we are investing in long-term growth opportunities through our video and platform software businesses, positioning the company for success as market conditions improve.”
UBS analysts retained a neutral rating on the stock and a 12-month price target of $10.60, but said to “expect positive reaction” to Monday’s results. At around midday on Monday, it was already trading at $9.67 which is more than 25% over its closing price last week, and more than 30% increase over the start of the year.
