JB Hi-Fi Share Price Benefits from Cashed-Up Consumers (ASX:JBH)

The share price of retail giant JB Hi-Fi Ltd [ASX:JBH] has been buoyed by solid consumer spending, driving record sales and earnings for the first half of financial year 2021.

With Australians spending more time at home thanks to the pandemic, households have amassed about $100 billion in savings.

A pile of cash that has helped spur along sales across the Australian retail sector.

ASX JBH Share Price Chart - Jb Hi Fi

Source: Tradingview.com

Continuing its strong December rally, the JBH share price is up a further 2.40%, or $1.22, to trade at $51.99 per share at the time of writing.

Is this the beginning of a spending spree?

JBH released its preliminary numbers for the six months for FY2021, showing a big surge in demand for consumer electronics and white goods.

Sales surged 23.7% to $4.9 billion compared to HY2020, seemingly unfazed by forced store closures.

Earnings grew by an impressive 75.9% to $463.7 million, while net profit jumped 86.2% to $371.7 million.

As might have been expected, online sales ballooned, up 161.7% to $678.8 million, representing 13.7% of total sales.

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JBH CEO, Richard Murray, commented on the stellar growth:

We are pleased to report record sales and earnings for HY21, in what has been an extraordinary period. Our continued focus on the customer, and investments in our online business and our supply chain, have enabled us to seamlessly meet our customers’ increased demand both instore and online.

JBH generated robust expansion in gross margins in key categories, especially in its Good Guys business.

The Good Guys’ first-half earnings grew by an impressive 142% to $127 million from $52.3 million in the year-earlier period.

Similar growth could be set to continue across the Australian retail sector for the rest of FY21.

UBS estimated in September that Australians spend about $63 billion annually on overseas and domestic travel.

With offshore travel banned, a large chunk of those funds are finding their way into the retail sector.

Keep an eye on margins

One thing we’ve learnt throughout the pandemic: retailers have pulled back on discounting goods.

Global supply chains have been disrupted by COVID-19, meaning stock levels have been relatively low.

The results: less discounting resulting in higher margins.

However, that could change in the second half of the financial year.

Super Retail Group Ltd [ASX:SUL] CEO Anthony Heraghty warned the level of promotional activity in H2 could increase as inventory levels improve.

Although, with international travel likely to remain off the cards for the time being, domestic spending could remain buoyed over the coming months.

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Regards,

Lachlann Tierney,
For Money Morning

 


Lachlann Tierney is an Analyst for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. Recently he has been working with Ryan Dinse. Lachlann is involved in two publications:


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