JB Hi-Fi keeps faith in store expansion plan

Electronics retailer JB Hi-Fi has posted a modest rise in profit, due to the continued expansion of its store network.

The company reported a 3.1 per cent rise in net profit after tax to $82.1 million for the second half of last calendar year, on the back of a 2.3 per cent rise in total sales for the group to $1.82 billion.

Sales at JB Hi-Fi branded store sales were up 3.1 per cent on the same period a year earlier, but sales at stores open for the whole of both periods were down 3.5 per cent, indicating that it was the opening of new stores that drove growth.

JB Hi-Fi says it managed to increase its gross margin slightly to 21.5 per cent, but its cost of doing business also rose, leaving its net profit margin unchanged at 6.8 per cent.

JB Hi-Fi's chief executive Terry Smart says the company is recording solid growth in many segments, but being held back by a slowdown in demand for TVs.

"Whilst we continue to see total sales growth, the visual (TV) category in particular negatively impacted comparative store growth," he noted in the report.

"The industry has seen TV sales decline over the past few years as the category moves towards a more typical replacement driven sales market.

The JB brand however continued to attract customers with our market share growing solidly." JB Hi-Fi says online sales have been growing by around 40 per cent, but still only make up around 2 per cent of the company's total sales.

The retailer is planning to continue its store roll-out, with another 15 store openings planned for this year.

Morningstar senior analyst Tim Montague-Jones says JB Hi-Fi shares have been undervalued before today because of concerns based on buying activity in the United States.

"Consumers basically go to these bricks and mortar type stores to work out what they want to purchase and then they go onto Amazon and buy online, so there was a fear that these bricks and mortar stores in Australia would suffer the same plight," he explained.

Terry Smart is upbeat about how the company started the year.

"We have seen a positive start to the New Year with total sales growth in January of 11.7 per cent and comparative store sales growth of 4.2 per cent," he said.

"January gross margin has improved on last year as we cycle the significant market-wide promotional period from last year." The company is expecting sales for the full financial year to be around $3.25 billion and net profit to be in a range between $108-112 million, despite comparable store sales shrinking by around 3 per cent.

The company has declared an interim dividend of 50 cents a share fully-franked, up from 49 cents in the same period last year.

JB Hi-Fi shares surged 12.6 per cent to $12.40 by 10:10am (AEDT) as investors greeted the better than expected result.

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