Why JB Hi-Fi Share Price Fell 6.5% on Positive Earnings

Jb hi-fi share price rise

Aussie retailer JB Hi-Fi Ltd [ASX:JBH] released a limited earnings report. There were a number of encouraging figures in the report:

  • Total sales up 41%;
  • Earnings before interest & tax (EBIT) up 24.9%;
  • Net profit after tax (NPAT) up 21%;
  • Earnings per share (EPS) up 13.7%; and
  • Interim dividend increased 19.4% from 2016.

Yet, at time of writing, JBH is down almost 6.5%.

Why the JBH share price fell

Though the giant retailer brushed off Amazon’s arrival and posted improved earnings figures, investors were disappointed by the lower-than-expected sales growth in New Zealand, and the newly acquired The Good Guys.

Total NZ sales were down 0.4%, and sales growth for The Good Guys in January was -3.5%

The group acquired retailer The Good Guys in 2016, which has increased revenues since.
However, sales growth for the new addition in January slumped 3.5%, which is said to be impacted by cycling strong sales of seasonal products. On that, CEO Richard Murray announced:

We are pleased with the progress we have made at The Good Guys and are confident about the future opportunities for the Group.

What’s next for JB Hi-Fi?

The group expects a heavy focus on sales and market share in the second half of financial year 2018. There is an expected change to the sales mix, which could result in sales growth exceeding gross-profit-dollar growth.

Total group sales are estimated to be around AU$6.85 billion, split between $4.75 billion and $2.1 billion for JB Hi-Fi and The Good Guys respectively. NPAT is forecast to be in the range of AU$235–240 million, representing up to a 15.5% increase on underlying NPAT.

Murray noted: ‘We are pleased with our performance in the first half of the 2018 financial year. We are clear on our objectives for the next 12 months and are excited in the outlook for the business.

The group hit 12-month highs at the end of January, defying short-sellers that have been bearish on Aussie retail for most of 2017.

Regards,

Ryan Dinse                                                        

Editor, Money Morning                               

and

Jack Cameron,

Junior Analyst, Money Morning

PS: Looking to cut through the noise in the markets to find what are potentially the best stocks the Aussie market has to offer? Then check out our new report, ‘Four Best ASX Stocks 2018’. You can access it here.

Ryan Dinse

Ryan Dinse

Ryan Dinse is an editor at Money Morning. With an academic background in economics, he believes that the key to making good investments is investing appropriately at each stage of the economic cycle.

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