Is the move by consumer electronics and whitegoods retailer giant, JB Hi Fi
(ASX:JBH) to go against the grain and spend the next three years upgrading and expanding its NZ operations a sign that it believes the Australian market is going ex-growth?
Buried in its 2021-22 results on Monday (most of which were detailed in a brief post end of year update in July), JB Hi Fi CEO Terry Smart sprang a major surprise with news the company would be looking to not only polish its existing stores across the Tasman, but look for significant growth from them.
“The Group recently completed a strategic review of the JB Hi-Fi New Zealand business and believes there is a significant opportunity to grow and expand the business,” the company said in its results release.”
JB Hi Fi said that over the next three years, it will be “investing in improving the JB Hi-Fi New Zealand customer offer, refreshing the store network, opening new stores and upgrading its online platform.”
To lead the repositioning and growth of the New Zealand business, the revealed it had named NZ veteran retailer Tim Edwards as Managing Director of JB Hi-Fi New Zealand.
“Tim previously worked at the Warehouse Group for more than a decade, including seven years as CEO of Noel Leeming, and brings deep local experience and long-standing relationships, combined with a passion for retail,” the company said.
Mr Smart said “We are delighted to welcome Tim to the JB Hi-Fi Group. He is a proven retail executive with an outstanding track record, particularly in the New Zealand consumer electronics and technology market. We look forward to growing our New Zealand business under his leadership.”
The results release revealed that JB Hi Fi’s NZ operations were hit by the Covid lockdowns in key markets, especially Auckland.
Sales only grew 0.3% in the year to June to $NZ262.4 million, with comparable sales up 0.3%. Second half sales were rose a faster6.3%.
“The key growth categories were Visual, Games Hardware and Smart Home. Online sales in New Zealand grew 56.7% to $NZ43.3 million, or 16.5% of total sales<“ JB Hi Fi said.
Gross profit fell 2.1% to $NZ45.7 million with gross margin down 43 bps to 17.4%. Coast of doing business was 12.8%, down 36 bps, and in absolute terms declined by 2.5% “as store wages remained well controlled.”
Earnings before interest and tax was up 51.7% to $NZ8.8 million. Underlying EBIT, excluding the impact of impairments in the current and prior year, was $NZ4.7 million, down $NZ1.3 million.
Australian companies do not single out NZ for mention when looking for new growth, especially retailers. Woolworths has been a consistent investor in its Countdown chain of supermarkets to keep them up to snuff when compared to the Australian outlets in look and range.
But NZ, with a population smaller than Sydney or Melbourne, is usually regarded as where Australian companies extract costs and try and offset currency moves and do not invest very much in growth.
JB Hi Fi’s Australian rivals will be watching its NZ moves closely and will rush to imitate if they see it is getting some traction in finding new sales growth.
JB Hi Fi is just one of a number of Australian retailers with operations in NZ – Kmart and Bunnings are major operators, as is Harvey Norman (JB Hi Fi’s Australian rival). Any sales growth will come from Harvey Norman in particular and local chains like Warehouse and Noel Leeming (where JB Hi Fi’s new boss in NZ has considerable experience).
Woolworths’ Countdown chain of supermarkets would be one of the largest Australian-owned chains in NZ.
That was only a small part of total group sales and earnings for the year to June.
Across Australia and NZ, JB Hi Fi saw sales rise 3.5% to $A9.2 billion for the year to June (it failed to keep up with inflation of 6.4%), net profit was up 7.7% to $A545 million and online sales for the year jumped nearly 54% to $A1.63 billion.
JB Hi said it had declared a final dividend of 153 cents a share ($1.53) fully franked, up 46 cents or 43.0%, bringing the total dividend for 2021-22 to 316 cents a share ($3.16), up 29 cents or 10.1%, and 65% of net after tax profit.
On top of this year company ended a $250 million Off-Market Share Buy-Back in April, meaning the Group returned $604 million to shareholders for the 2021-22 financial year.
CEO Terry Smart said in Monday’s statement to the ASX “We are pleased to report record sales and earnings for FY22. These results reinforce the enormous trust our customers have in our brands and the strength of our multichannel offer, which continues to provide customers with choice on how to shop.”
“The Group has continued to invest in its multichannel strategy across online and supply chain, including upgrades to its websites and distribution centres and expanded customer delivery options.
Looking ahead the company said it was “pleased with its start to FY23, with continued sales momentum and strong sales growth rates over a three-year period.”
Mr Smart said, “As we enter an increasingly uncertain retail environment and household budgets come under further pressure, customers will gravitate to trusted value-driven retailers. Our ongoing strategy of providing customers with the best value and outstanding service every day, will ensure our brands continue to deliver for our customers and remain a destination of choice into the future.”
The shares ended at $45.10, down 1%.
