What’s Happening with the JB Hi-Fi Share Price?

Why has the JB Hi-Fi share price fallen?

JB Hi-Fi Limited [ASX:JBH] is a speciality discount retailer of branded electronic goods, home appliances, and home entertainment and software. At present, JBH has 194 stores across Australia and New Zealand, with a total of eight new stores opening during the 2016 financial year.

JB Hi-Fi shares were down 0.70% at the time of writing.

What now for JB Hi-Fi Ltd?

As the JBH share price moves either side of $23, if you don’t already own them, you may be asking yourself if it’s too late to buy in.

Perhaps not.

Just when you think the chain store has reached maximum growth, JBH have confirmed it’s entering into two underdeveloped retail markets: Tasmania and central western New South Wales.

Only two days ago, JBH said it will take over the Bernadi’s Supa IGA site in Dubbo, NSW.  JBH had been sniffing around the country town for some years now. However, because of JBH’s store layout, it needs a large floorplan. The old supermarket is an ideal home for the electronics retailer.

According to the Mayor of Dubbo, Mathew Dickerson, roughly 130,000 locals from nearby towns shop in Dubbo. How much this particular store will add to the bottom line for JBH is something we don’t know. But the Dubbo Big W store is the third highest retailing store for Big W Australia.

In addition, JB Hi-Fi will open their first Tasmanian store in May this year. The Launceston shop will retail kitchen, laundry and home appliances, coupled with the standard electronic goods, software and home entertainment items.

Adding to the growth, JBH have a total target of 75 HOME stores, tapping into the $4.6 billion home appliances market in Australia.

JB Hi-Fi anticipates total revenue for the 2016 financial year to reach $3.9 billion, with net profit after tax (NPAT) hovering around $143–147 million.

Compare that to the FY15 outlook —$3.6 billion in revenue and NPAT of $127–131.0 — and JBH’s financials are showing improvement. Although total 2015 revenue fell short by $100 million, NPAT exceeded expectations at $136.5 million.

The company keep store fit outs cheap — around $1–1.5 million — and are now only expanding into areas with limited competition, such as Tasmania, central west NSW, and parts of Western Australia.

JBH pay a consistent dividend. It was 90 cents for the 2015 financial year, giving the stock yield around 4%. This may rise, though, as the interim dividend for 2016 was 63 cents per share.

The chain store has a solid history of both total revenue and NPAT increasing each year, in addition to expanding their dividend payments. I would expect to see more investors, looking for both yield and capital growth, piling into the stock over the next 12 months

The increased volume will likely lead to more volatility in the JBH share price, making the stock ideal for short term traders.

In saying that, basic technical analysis suggests that this stock is about to climb higher. Get ready for the next leg up.

Shae Russell,
Money Morning

Since starting out in the financial markets over a decade ago, Shae has extensive experience across various aspects of the industry. Shae cut her teeth in the derivatives industry, teaching clients basic trading techniques with technical analysis.

Joining Fat Tail Investment Research eight years ago, Shae has worked across a number of publications, such as Australian Small-Cap Investigator, Gold Stock Trader and Microcap Trader. She’s spent the past two years however, honing her macro analysis skills alongside Jim Rickards, showing Australians how to invest and profit form global macro trends.

Drawing on her extensive experience, Shae is a contributor to Money Morning, and lead editor of sister-publication Markets & Money, where she looks at broad macro trends developing around the world, combining them with her distaste for central banks and irrational love of all things bullion.

Money Morning Australia