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What’s Next For JB Hi Fi?

JB Hi Fi is on a roll but the big question is how long it will last as their shares climb to $47.41 ahead of today’s financial results for the last quarter.

Currently management are working through the implications of the shutdown of 46 Melbourne stores and 21 of their The Good Guys stores, as sales surge online with JB Hi Fi getting 25.6 million visitors online last month and The Good Guys 10.3M according to SEMRush Analytics.

The biggest problem facing consumer electronics retailers and appliance retailers is supply with management also concerned as to the implications on the last quarter of the year. With JB Hi Fi tipped to deliver a significant increase in sales and a 20% increase in profits due to elevated retail sales across the board during the COVID-19 lockdown.

There is also speculation that JB Hi Fi is in the market for another acquisition especially in the online or premium end of the appliance and consumer electronics market.

During the past year, The Good Guys has significantly expanded their premium business with new look stores and a concentration on delivering “better service”. This has seen TGG deliver improved margins for premium appliances and entertainment gear.

Credit Suisse analyst Grant Saligari said he expected a near-term spending bubble on household goods driven by government income support measures and upgraded his recommendation on JB Hi-Fi shares to neutral. He said “The biggest single factor influencing income has been superannuation withdrawals under the early release scheme, which totalled $18bn to the end of June and $14bn in July and likely swamped any other changes in savings behaviour,” Mr Saligari said in a note to clients.

“Extension of JobKeeper to March 2021, albeit at a reduced rate and with tighter eligibility ­criteria, provides an additional ­income safety net.

“Substitution in spending to household-related items is also supportive.”

“Whilst calendar 2021 is likely to be a very different story, we do not expect the market to focus on that risk yet, given uncertainty with respect to the rate of labour market recovery and the current fluid nature of income support policy,” Mr Saligari said.

Recently the Company held a management meeting to discuss the implications of COVID-19 and to look at what opportunities there are in the market for the business to grow.

According to sources “supply” is still a big issue along with the lack of traffic to their stores. In Victoria consumers are restricted from which JB Hi Fi stores they can pick up goods from due to travel restrictions with the retail group lobbying Government for clarity on the restrictions.

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