Electronics retailer JB Hi-Fi’s profit has jumped 12 per cent, despite its earnings margin falling as fierce competition forces it to cut prices.
The company on Monday revealed underlying net profit after tax of $233 million for the year to June 30, up from $207 million a year earlier.
That result was slightly ahead of guidance given in May for profit of $230 million, which it downgrade from an earlier guidance of between $235 million to $240 million due to difficult trading at its Good Guys chain amid heavy market-wide discounting.
Total sales across the group were $6.85 billion, in line with guidance and up 21.8 per cent from last year, boosted by the full-year inclusion of The Good Guys, which it bought in late 2016.
“We are pleased to have delivered another year of record sales and earnings,” chief executive Richard Murray said.
“It was another strong result for the JB Hi-Fi business in Australia, as we continue to delight our customers and deliver on our strategic objectives.”
JB Hi-Fi’s shares, which have been under pressure from the arrival of Amazon in Australia and are the second most shorted stock on the ASX, had risen 2.6 per cent to $24.10 by 10.20am.
Tough start to the year
But trading had slowed in July, the company said, with comparable sales at JB Hi-Fi Australia growing 0.3 per cent, compared to 6.5 per cent in the same month last year, and growth of 1.4 per cent at The Good Guys, compared to 5.7 per cent.
Mr Murray said July was a good result considering it was cycling a strong performance in the prior period and that the soccer World Cup had brought TV sales forward to June.
For 2018, sales within the JB Hi-Fi chain jumped 9 per cent on a same-store basis, and 9 per cent when including new store openings, driven by phones, computers, audio devices, games and other electronic hardware.
Gross margins fell by 7 basis points due to higher sales of low-margin products and dropping prices to “reinforce the business’ market leadership”.
The Good Guys had a difficult year, with same-store sales up 0.9 per cent, its gross margin falling almost a full percentage point to 20.28 per cent due to heightened price competition.
“Despite the challenging conditions in the home appliances market in the second half, we remained focused on sales and market share,” Mr Murray said.
“Having owned The Good Guys for over 18 months we are now starting to realise the benefits of the scale of the combined group and remain excited by the opportunity to grow one of Australia’s leading retail brands”.
Improved delivery and “click and collect” options drove growth in JB Hi-Fi’s online sales of 38 per cent to $210 million, representing 4.6 per cent of total sales.
On a statutory basis, which factors in the transaction cost of buying The Good Guys and a write-down to its New Zealand operations, JB Hi-Fi’s net profit jumped 35.3 per cent.
JB Hi-Fi declared a full-year dividend of $1.32 per share, up from $1.18 last year, to be paid on September 7.