JB Hi-Fi profit soars with 35 per cent increase amid industry uncertainty

JB Hi-Fi profit soars with 35 per cent increase amid industry uncertainty

When Amazon landed in Australia in late 2017 many commentators thought it would be a death sentence for leading local electronics retailer JB Hi-Fi (ASX: JBH).

But the business has survived and pulled out a solid result, with profits up by 35 per cent for FY18.

Boosted by its takeover of rival The Good Guys, JB Hi-Fi posted a 12.3 per cent jump in full-year net profit to $233.2 million on underlying NPAT (up 35.3 per cent on statutory NPAT).

Other results were also up, with sales increasing by 21.8 per cent to $6.9 billion and earnings up 14.5 per cent to $350.6 million.

JB Hi-Fi CEO Richard Murray says the strong results weren't easy to reach, especially the group's second half.

"We are pleased to have delivered another year of record sales and earnings in FY18," says Murray.

"It was another strong result for the JF Hi-Fi business in Australia, as we continue to delight our customers and deliver on our strategic objectives. Whilst it was a challenging second half for The Good Guys, we made strong progress towards our key initiatives as we position the business for future growth."

At the end of 2017, the company faced down the looming threat of Amazon, but seems to have overcome the online giant for now.

IBISWorld senior industry analyst Kim Do says the company leveraged its economies of scale to lower prices and increase profit margins.

"As new products, click and collect, and online order fulfilments have increased JB Hi-Fi's sales volumes, the company has concentrated on controlling its operating costs," says Do.

"This has remained a competitive advantage for the company and has allowed JB Hi-Fi to report an increase in NPAT."

Despite JB's success this year, Do says the company will continue to face more pressure from Amazon over the next five years.

"Companies like Amazon typically focus on gaining market share at the expense of profit margins," says Do.

"Amazon is in the market for the long haul and they're likely willing to take losses for numerous years to make it work in Australia."

JB Hi-Fi performed well in Australia, with sales up by 9.4 per cent to $4.54 billion. However, the same cannot be said about JB Hi-Fi's operations in New Zealand, where sales were down 1.1 per cent to NZD213.5 million.

JB's online presence continued to grow, with sales online up 32.1 per cent to $209.9 million, representing 4.6 per cent of total sales in Australia.

The Good Guys, JB's most recent acquisition, continued to grow under the eye of its new parent. Total sales for the 12 months to 30 June 2018 were $2.1 billion.

Murray says the opportunity to continue to grow The Good Guys is an exciting one.

"We continued to take a considered and deliberate approach to change at The Good Guys," says Murray.

"Despite the challenging conditions in the Home Appliance market in the second half, we remained focused on sales and market share. Having owned The Good Guys for over 18 months we are now starting to realise the benefits of the scale of the combined group and remain excited by the opportunity to grow one of Australia's leading retail brands."

The board of the company declared a dividend of 46 cents per share fully franked.

Over the next financial year, the company expects to open five new JB Hi-Fi stores, two new The Good Guys stores, and close one JB Hi-Fi store in New Zealand.

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