JB Hi-Fi projects drop in annual profits despite steady sales

Published on Fri, 27/04/2012, 11:12:31

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By Claire Reilly

JB Hi-Fi has today announced that it expects its annual sales results for the 2011-12 financial year will be in line with forecasts, predicting sales of $3.1 billion for the year following a strong January-March quarter.

According to a Trading Update released by the company today, sales for the three months were up 8.8 per cent (7.5 per cent including Clive Anthonys stores), while comparable store sales were -1.3 per cent, up from -2.2 per cent at the half-year mark in December.

The expected $3.1 billion sales result will be a slight increase on 2011 when the company reported annual normalised sales of $2.96 billion.

However, the company has also issued a profit guidance of $100 to $105 million after tax, which is down on last year. In 2011, JB announced statutory net profits after tax of $109.7 million (or $134.4 million when the company’s one-off Clive Anthonys restructuring charge was excluded). Once again, the 2011 figures were below the previous year's, when statutory profits for FY2010 were $118.7 million after tax.

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Despite this, JB Hi-Fi CEO, Terry Smart, said the projected results are strong considering the tight retail market.

“The market remains very competitive but, with our core everyday low price (EDLP) message central to our customer proposition, we have maintained our market leading position,” said Smart. “We anticipate that this level of discounting will continue over the next quarter but we do not believe that this is a long term structural change.

“While the impact on our earnings is clear, as a market leader with an everyday low price proposition, JB Hi-Fi will react aggressively to maintain our market leadership.

“Our low cost of doing business is one of our core competitive advantages and enables us to operate at healthy profit margins notwithstanding competitor activity. This is driven by high sales per square metre and an obsession with not letting waste and inefficiency creep into our cost structure.

“Over the March quarter we improved our cost of doing business percentage over the same period last year.”

One incredibly strong area for JB Hi-Fi was online, with the company reporting a 76 per cent increase in sales on the prior period to 31 March 2012, and an average of 965,000 unique website visitors per week. The company also reported that its digital streaming music service, JB NOW, “continues to gain traction” following the launch of dedicated mobile apps for the service this month.

“We believe the combination of online and digital delivery will provide the most compelling out of store experience to match the success of our in-store program,” said Smart. “The continued success of our recently opened stores combined with our growth online and expansion into digital services will see us continue to grow into the future.”

Other news from JB Hi-Fi's Trading Update:
Your loss is our gain: JB eyes WOW & Dick Smith market share

UPDATE:

Since releasing today's Trading Update, JB Hi-Fi's share price has taken a dive, falling to a three-year low of just over $10 per share.

JB Hi-Fi's share price is the lowest it has been in more than 3 years.




The story JB HIFI is spreading, about competitive pricing causing their problems, is a falsehood. Since arriving in Australia over four years ago, it's been easy to realize that this country -- for whatever reasons, and because of whatever deals are made between big business and others -- is largely run on the monopoly, duopoly system. That system DOESN'T allow for competitive marketing, keeping prices far too high, and resulting in business failure (witness the book chains Borders & Angus Robertson, owned by the same people). Coles & Woolworth are separately owned, but they regularly "share" catalogues, thus keeping prices fixed within a certain range. The dealers of music and movies (JB hifi, Dick Smith, etc.) do much the same thing. Their business failures are due to NOT marketing items at an affordable price, and getting as much money as they can for the first year those items are marketed. Sadly, the profits don't go to the employees. If these companies (CEOs and stockholders, who make not only the lion's share of profits, but also dig into the profts of the "antelope", the employees) truly want to survive, and keep supplying people with jobs, they'll cut their prices to a much lower level -- and keep them in that range. But first, government forces have to insist on fair market pricing, and no more duopolies and monopolies. Don't hold your breath.
Posted by vint. 29/04/2012 07:31:04 AM
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