Electronics retailer JB Hi-Fi has emerged from retail’s ‘killing season’ stronger than ever – posting a record half-year profit of $170.6 million.
The bumper sales come after the Australian economy recorded one of its worst years in recent history.
As heavily indebted Australians cut back on discretionary spending in response to stagnant wages, annual GDP growth dropped to just 1.4 per cent in the middle of last year.
And the downturn knocked retail for six.
And, only last week, Colette by Colette Hayman announced it, too, had gone into voluntary administration.
The industry’s woes underscore just how impressive JB Hi-Fi Group’s recent performance has been.
Despite the tough retail conditions, JB Hi-Fi’s statutory net profit after tax increased 6.6 per cent to a record $170.6 million over the half-year to December 31, 2019.
Its total sales rose 3.9 per cent to $4.0 billion; earnings before interest and tax (EBIT), 8 per cent, to $255.6 million.
Markets had predicted statutory net profit after tax to come in at $166.5 million and EBIT to grow a more modest 3.9 per cent.
JB Hi-Fi chief executive Richard Murray attributed the company’s success to society’s ever-increasing reliance on technology.
“People continue to focus on their personal ecosystem – and their mobile phone and connected technology and computer is a critical part of that,” Mr Murray told The New Daily, describing the half-year as the company’s “mobile phone half”.
“And when it comes to back to school – if any of my kids don’t have their laptop, they can’t access their homework … there’s just more and more tech in people’s households and that’s been a good outcome for us.”
JB Hi-Fi had profited from positioning itself as Australia’s go-to destination for all things tech, Mr Murray said.
A focus on streamlining back-end processes had pushed down the cost of doing business while keeping the same number of staff available to serve customers.
“We want to make sure there’s as much labour out on the shop floor, not out the back processing or receiving goods. So whatever we can do to drive productivity in our back of house and supply chain means that we can make sure we continue focusing on serving our customers,” he said.
“So from how to receive stock more quickly to matching up invoices and delivery dockets – none of it’s particularly sexy, but they’re pain points at the back of our stores. And if we can do it across millions of deliveries a year … it’s really worth it.”
Mr Murray said mobile phones, computers, and audio and visual equipment were the main drivers of growth, with online sales also increasing a massive 18.3 per cent to $170.8 million, or 6.3 per cent of total sales.
The company’s appliance and white goods division, The Good Guys, also beat market expectations – recording a 1.5 per cent rise in total sales and a 14.7 per cent lift in EBIT.
‘They really are a standout’
Mr Murray said the company expected continued growth over the next six months but warned investors not to expect the same pace of gains.
Asked if the coronavirus would affect future trade, Mr Murray said it was too early to tell whether customer spending would fall but conceded the virus may impact the supply of electrical components from China.
Retail Doctor CEO Brian Walker attributed JB Hi-Fi’s success to its “on-focus” marketing and ability to adapt to new trends – as exemplified by its embrace of consumer electronics.
“The results are just a culmination of many years of very, very good retailing. They really are a standout,” Mr Walker said.
“And the key thing with JB Hi-Fi is very much this change and adaptation. They’re always changing their categories, their mix [and their prices].