How JB Hi Fi Is Hurting Woolworths And Dick Smith Stores
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JB Hi Fi has been described as an oasis in the desert of discretionary retail by leading investment bank Morgan Stanley meanwhile Goldman Sachs has said that the shortage of display panels has impacted several consumer electronics retailers with Clive Peeters losing $5M in sales in January alone.

recent ChannelNews survey of 5 major retail analysts concluded that JB Hi Fi was the best consumer electronics retailer in Australia and that Woolworth via their Dick Smith chain will struggle to take market share away from JB Hi Fi which they tried to buy last year for $1.7billion.

They also forecast that Clive Peeters will struggle to survive due to high debt levels and an inability to service the debt as sales decline due to market conditions and aggressive marketing by competitors such as Harvey Norman, Dick Smith and JB Hi Fi.

During the recent ASX reporting period several CE retailers revealed a major downturn in EBIT growth with JB Hi Fi being the only retailer to report EBIT Growth of 39.5%.

And while some retail trade media and mass media organisations reported a 59% decline in profits for Harvey Norman the analysts and competitors are saying this is wrong.

See EDIT Chart below

1HO9 Result Comparison

 

Sales Growth

LFL Sales Growth

EBIT Growth

JB Hi-Fi

27.6%

11.1%

39.5%

Harvey Norman

2.8%

1.4%

-22.8%

Dick Smith/Tandy

9.1%

5.8%

-26.7%

Clive Peeters

-0.2%

-10.3%

-76.0%

“Harvey Normans profit decline was 29% and while this is across all of their businesses their consumer electronics business was extremely healthy. They also have little debt so they like JB Hi Fi will be able to survive in the future as the going gets tough” said one analyst.

 

The recent Goldman Sachs report said ” JB Hi Fi can continue to defy the challenging consumer spending environment and achieve sales growth of 15%, on our estimates, even if sales for the Australian electronics and music retail market fall beyond the 25-year low (-9%). JBH’s key strengths include space growth, “in-built” like-for-like growth via store maturation, store locations, category mix, industry consolidation, and a distinctive retail concept”.

They went on to say “We sense that few investors adequately understand how JBH continues to outperform competitors. We believe the market is underestimating the competitive advantage created by JBH’s skew to shopping centre locations. Not only does JBH benefit from local monopolies on many of its categories but the resilience of shopping centre foot traffic is also likely to be a major near-term positive”.