JB Hi-Fi Reinstates Earnings Guidance | KOSEC

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JB Hi-Fi Reinstates Earnings Guidance

Caroline Wong

Caroline Wong is a Research Analyst at KOSEC - Kodari Securities. She writes on markets and focuses on ASX Top 300 companies. Email Caroline at c.wong@kosec.com.au.

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JB Hi-Fi Limited (ASX: JBH) previously withdrew their earnings guidance in March due to the uncertainty created by the COVID-19 pandemic, however on the 11th of June, the group released a new guidance. This follows an announcement from their competitor Harvey Norman Limited (ASX: HVN) which detailed a special dividend payment and a retailing trading update that showed 17.5 per cent sales growth as of the end of May, year to date (YTD).

Sales metrics need to be considered as a factor for this guidance, with 1H20 seeing an increase in JB Hi-Fi Australia’s sales by 5.1 per cent, which is up by 4.4 per cent from the prior corresponding period (PCP). There is now a 20 per cent increase in 2H20 YTD growth, showing a total increase in FY20 YTD by 11 per cent.  On the other hand, it’s New Zealand (NZ) division saw 0.8 per cent 1H20 growth; with this relatively low growth due to the pandemic forcing 14 locations to shut down as they were classified as a non-essential business. Unfortunately, the NZ subsidiary saw a fall of 19.3 per cent in 2H20 YTD sales growth, which comes out as a 7.3 per cent fall in total sales for FY20 YTD.

Although this seems like a sizable drop, it must be remembered that the NZ division only contributes to approximately 3 per cent of total annual sales. NZ now has no active COVID-19 cases, which is accelerating recovery with the economy opening up. Meanwhile, JBH’s subsidiary, The Good Guys, saw an increase of 1.5 per cent sales growth in 1H20 which compared to the PCP is up by 0.6 per cent. 2H20 YTD has seen The Good Guys increase sales growth by 23.5 per cent, elevating FY20 YTD figures to 10.7 per cent.

Entering the pandemic, strategic shutdowns and integration of Shopify Plus into distribution chains set JBH up for success. When less footfall was observed in airports and shopping centres, some key locations were shut down. This, in turn, helped save the group on operating costs. Meanwhile, an surge in e-commerce boosted sales, as a need for working from home equipment and entertainment sustained growth. Undeniably, while hygiene protocols and store safety measures did incur additional costs, the positive growth helped offset this expenditure.

The new earnings guidance estimates an approximate AUD7.86 billion to be earnt in sales, with JB Hi-Fi Australia garnering AUD5.26 billion, JB Hi-Fi New Zealand comprising AUD0.22 billion, and the Good Guys bringing in AUD2.39 billion. Net profit after tax is expected to be between AUD300 million and AUD305 million, which would be an increase of 20 to 22 per cent compared to PCP. More broadly speaking, the timing of this release emerges one day after JBH’s competitor, HVN released their retail trading update. Specifically, data shows JBH outperforming HVN's 2H20 YTD sales growth in Australia by 2.5 per cent, with JBH’s growth at 20 per cent while HVN’s growth at 17.5 per cent.

By Caroline Wong 

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