Australian FY22 earnings preview - JB Hi-Fi

JB Hi-Fi Limited is a consumer electronics and home appliance retail company with 316 stores across Australia and New Zealand. It is part of the ASX200 and sits under the Consumer Discretionary Sector. JB Hi-Fi is due to report its Full Year audited numbers on Monday, August 15. (Expected to be similar to the preliminary results outlined below.)

For the Covid lockdown impacted first half of the year, JB Hi-Fi reported a respectable 9.4% fall in Net Profit After Tax (NPAT) to $287.9mn. It also announced an interim dividend of 163 cents per share and a capital return of $250mn to shareholders through an off-market buyback.

Group CEO Terry Smart said the result was driven by “elevated demand across all of our sales channels, particularly online which our customers seamlessly transitioned to during the various lockdowns.”

The second half of the year has brought with it a new set of challenges for discretionary retailers. Consumer confidence is tumbling against higher mortgage costs and inflation pressures. Retailers are also facing higher costs from wages and rents.

However, the release of preliminary Full Year results on July 19 shows the resilience of the JB HI-FI business model. Total Sales increased throughout the year by 3.5% to $9.2bn, and Net Profit After Tax was $544mn, a 7.7% increase from 2021. The rise was “driven by elevated sales growth and improvement in gross margins".

Whether the growth is sustainable is another question. Monetary policy takes time to bite. However, there is evidence that higher rates are dampening consumer spending volumes. Belt-tightening is underway.

When this occurs, the first purchases consumers cut back on are discretionary purchases. A reality that is reflected in the share price of JB Hi-Fi, which is currently trading at $44.57, 20% below its March $55.40 high.

Reinforced by the expectations of more RBA rate rises, a band of resistance between $43.50 and $45.00 is currently capping the JB Hi-Fi share price. A sustained break above this resistance zone is needed to avoid a retest of the mid-June $36.69 low.

Source Tradingview. The figures stated are as of August 9, 2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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