Discount electronics retailer JB Hi-Fi has recorded a larger-than-expected fall in half-yearly profit due to what it called challenging conditions in the retail sector.
The company reported net profit of $79.6 million in the six months to the end of December last year, down 9 per cent on its previous first-half result.
JB Hi-Fi says the three-week post-Christmas trading period was particularly soft, and the weakness was driven by poor TV sales.
In December, the company said it expected a 5 per cent fall in earnings.
In a statement, chief executive Terry Smart said it had been a tough start to the year.
"Consumers were suffering from 'promotional fatigue' and therefore have not reacted as well to our post-Christmas promotional offers as in previous years," Mr Smart said.
"While the market will remain challenging, we will continue to focus on delivering customers a unique and engaging shopping experience both in-store and online." An interest charge on debt used to initiate a share buyback also affected the result.
Looking ahead, the company says it expects full-year sales to rise 5 per cent to around $3.1 billion for the year.
"January sales were soft, especially in those early weeks, with JB Hi-Fi branded stores' comparable growth of -5.5 per cent," Mr Smart said.
"However in outlook, while it's still early, we have seen improvements in February sales, which for the month to date for JB Hi-Fi branded stores have grown 8.4 per cent and on a comparable store basis have grown 1 per cent." The market seemed to like the result; JB Hi-Fi shares closed 0.3 per cent higher at $12.03, with analysts expecting much lower profits.
But Roger Montgomery, from Montgomery Investment Management, says the result highlights the squeeze faced by many retailers.
"The market currently is focusing on a 5.5 per cent increase in sales and the reality is that the company's profit was actually down 9.4 per cent for the half," Mr Montgomery said.
"It tells us that operating a retail business in Australia is getting tougher.
"Margins are getting lower; margins are being squeezed and there's not enough growth in sales to offset the increase in costs." Mr Montgomery says JB Hi-Fi has been successful in attracting consumers looking for low prices but fears it is exactly those tech-savvy customers who are now likely to go online for an even better deal.
"The internet is ...
certainly growing the fastest in terms of sales as a channel, and it's still only a very small part of retail sales in Australia, so it's got a long way to go," he said.
