COMMENT: Should JB Hi Fi Sell Or Stick It Out?
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The 61% increase in revenue and the 70% increase in profits by JB Hi Fi bode well for the consumer electronic industry. It also sends a clear message that consumers are changing their buying habits with many of them prepared to spend money on games, new TV’s and notebooks than over fashion items or the occasional holiday.

And while the CE industry use to seen as “Toys for the boys” many women are now turning to gaming and entertainment devices such as flat screens and DVD players.


For JB Hi Fi the big question is has the Company peaked and is now the right time for the Company to cut a deal with Woolworths.


The answer is most probably yes on both counts. The downside for JB Hi Fi long term is that penetration of the digital TV market is now hitting the 50% mark with the last 50% more likely to want a heavily discounted product.

Also set to impact the Company is that during the next few years we are set to see an explosion in music, gaming and movie content online with consumers bypassing a retail store to buy from their favourite online site which could well be owned by the likes of Sony or a bunch of Hollywood studios. However a big bonus will be July and August sales which will be affected by heavy promotion by CE vendors selling product off the back of the interest in the Beijing Olympics. 

Also set to hurt is the lowering in cost of PC’s and notebooks with the IT industry already feeling the impact of reduced margins.


Right now JB Hi Fi could demand a premium price from Woolworths who have admitted that they are in the market for an acquisition. While on the other hand Woolworths could well decide to sit on the fence for 12 months to see what sort of result JB Hi deliver in 12 months time.

 


Shares in JB Hi-Fi Ltd rose over 4 per cent after the Company beat forecasts for 2008 full-year profit. They have also said that July and August sales are very strong.


The net profit of $65.1 million in fiscal 2008, is up from $40.4 million in 2006/07, as sales revenue rose to $1.83 billion, from $1.28 billion last financial year.


The result exceeded the company’s recent profit guidance in June of circa $64 million, but the retailer has kept its forecast on hold.


What is abundantly clear is that if CE vendors have the right product whether it be a new iPhone or gaming console or the right flat panel TV consumer will find the money to buy a CE device.
It is also clear from the JB Hi Fi and the recent David Jones results that consumers are ditching their traditional spending patterns for new investments in phones, camera’s, games and music along with flat panel TV’s.