JB Hi-Fi strategy shift wipes out NZ earnings

Revenue at JB Hi-Fi in New Zealand fell 0.4 per cent to $124.6m, although the group delivered record sales and earnings. Picture / Brett Phibbs

JB Hi-Fi's rejigged strategy for its New Zealand business all but wiped out first-half earnings on this side of the Tasman as the discount consumer electronics chain shut one store and quit selling whiteware goods.

The New Zealand division reported negligible earnings before interest and tax in the six months ended December 31, compared to $1 million a year earlier, which included $400,000 of costs from closing a store, and exiting and rebranding its JB Hi-Fi Home stores, the Melbourne-based company said.

At an ebit margin of 0.02 per cent, that implies earnings of about $25,000. Revenue fell 0.4 per cent to $124.6m and gross margin shrank 169 basis points to 16.31 per cent.

"We continue to reposition the New Zealand business as part of our strategy to improve performance," the retailer said in presentation slides accompanying the release. "One JB Hi-Fi store was closed and we have exited whitegoods and rebranded the four stores to JB Hi-Fi" from JB Hi-Fi Home.

The discount retailer signalled the shift for the New Zealand division last year, taking an A$15.8m ($17m) impairment charge on the business after reviewing the unit and deciding on a way to revive sales and fatten margins.

Consumer electronics retailers have faced skinnier margins as vendors cope with cheap imports and accelerating obsolescence.

Government figures show the value of electric and electronic goods retail sales rose 5.8 per cent $3.22 billion in the March 2017 from a year earlier, lagging an 11 per cent increase in the volume of sales. Over a five-year period, the value of sales rose 20 per cent compared to volume growth of 76 per cent.

JB Hi-Fi today said online sales almost doubled since the launch of a new website in August last year, accounting for 3.8 per cent of first-half sales, or $4.8m, compared to 2 per cent a year earlier.

The company's 15 New Zealand stores are a small part to the Australian group's 311 JB Hi-Fi and Good Guys retail outlets. The group reported a 21 per cent increase in first-half profit to A$151.7m on a 41 per cent gain in revenue to A$3.69b.

JB Hi-Fi forecast annual profit of between A$235m and A$240m in the 2018 financial year on sales of A$6.85b.

"We are pleased to have delivered record sales and earnings in the first half," said chief executive Richard Murray. "It was another strong result for the JB Hi-Fi business in Australia, particularly through the important November and December periods."

The board declared a fully-franked interim dividend of A86c per share, payable on March 9 with a February 23 record date.