JBH - JB Hi-Fi

[Chasero]

I came to that conclusion in Myer many years ago!

Not a desirable retail experience, IMO.

I actually went to the boxing day sales.. and compared to last years, there was virtually no difference in pricing.

Even though they claimed this would be the biggest year for discounts ever!

I'd rather shop online lol.

 

[McLovin]

I actually went to the boxing day sales.. and compared to last years, there was virtually no difference in pricing.

Even though they claimed this would be the biggest year for discounts ever!

I'd rather shop online lol.

A few days ago I went to an outlet mall about an hour from NYC. As an example here is what I bought from Timberland.

1x pair of boat shoes
2x jumpers
1x hoodie
1x tshirt
1x button up shirt

Total cost $180

In Australia, even during sales that would have probably cost me ~$400. Everything was "in stock", ie it wasn't the left overs that no one wanted to buy on the Main Street and they were all premium brands (Lacoste, Armani, Polo, Guess, A&F, A&E -- 130 stores all up) not the cr#p that passes for factory outlets in Australia. They had those North Face bubble goose jackets for $55, the ones Kathmandu sell for $500. I spent about $600-$700 on the day but probably bought about $5,000 worth of stuff if I had done it in Australia.

According to Gerry Harvey's logic, if I get pulled up at Customs then I will whinge and complain and not do it again because I will get charged GST.

 

[notting]

Unless I try something on I can rarely tell what the thing is going to look like, so clothing shops should be OK unless you try on then go home an buy online.
But if the shops become extinct not even that will be possible.
They need to create gimmiks to get young people in stores.
I never buy pop corn at the supermarket but I buy a bucket load when I go to the movies at rip off prices!

 

[McLovin]

Unless I try something on I can rarely tell what the thing is going to look like, so clothing shops should be OK unless you try on then go home an buy online.
But if the shops become extinct not even that will be possible.
They need to create gimmiks to get young people in stores.
I never buy pop corn at the supermarket but I buy a bucket load when I go to the movies at rip off prices!

I don't have a problem buying clothes on the internet. I've done it for years and I know my size but I take your point. However, what I was really getting at is that it is symptomatic of retail generally in Australia.

 

[Chasero]

No pls.

Holding long @ $12 looking for an exit!!

Finally, no more RED in my portfolio as of today.

JBH rally here we come!

Still can't believe it dropped to ~$11 tbh

 

[NoMoreChillies]

watching JBH drop to $11 made it buy for me today, although i am watching it very closely.

 

[tinhat]

watching JBH drop to $11 made it buy for me today, although i am watching it very closely.

Good luck to you but I've given up on trying to catch falling knives. Even at that price the yield doesn't justify the risk to my capital. Shrinking margins, slow to no growth. Uncertain outlook for industry. Dick Smith to be offloaded by Woolies. Not a stellar outlook. Looking at the chart there is nothing in the TA giving a buy signal except for a very short run play as the price should bounce off the lower boundary of the Bollinger band.

 

[notting]

JB seems especially vulnerable as the clientele were the savvy ones who new where to get the best prices over the years, whereas the Harvey Normal people where just the zombies who followed the "No Interest Nothing to Pay" - con.
So the savvy's would be savvily turning to the internet for even better deals. Hence JB could be even worse off than Normal. As buy by remote control becomes the new Normal.

 

[Tightwad]

jb's increased its online sales by about 87% last time.. still retail is being hammered.

It sounds cheap and there are few bullish on it, but its too long a wait until retail kicks off again.

 

[Nutmeg]

jb's increased its online sales by about 87% last time.. still retail is being hammered.

It sounds cheap and there are few bullish on it, but its too long a wait until retail kicks off again.

There was an interesting article today in the Fin Review. Bain & Co, a management consultant firm, conducted a study into Australian retailing. As you would all know, the mark up that Australia retailers make compared to retailers in equivalent markets abroad is between 25% and 50% higher. The Bain & Co study concluded that the real cause of the pressure that Australian retailers are presently under arises not from leakage to the internet as such but from "price transparency", i.e. the ability to compare prices for the same item in Australia and abroad on the internet. That price comparison then leads to purchases from online retailers is a consequence rather than a cause of leakage to the internet. Be that as it may, the fact remains, in my view, that bricks-and-mortar retailing is simply never going to be able to compete with an online retailer. The latter needs nothing more than a large warehouse and skeletal staff to run an extremely lean business.

 

[zac]

I think the bricks and mortar type stores have the advantage when it comes to larger consumer goods, ie white goods, large tv's or other long term purchases.
Reason being is that theyre hard to get online due to size, delivery etc.
Having said that, these items probably wouldnt make more than 20% of their sales im guessing.
Its the smaller everyday type items I bet that stores like JB Hi-Fi were doing so well in, ie ipods, cameras, movies, etc

 

[Tyler Durden]

I think the bricks and mortar type stores have the advantage when it comes to larger consumer goods, ie white goods, large tv's or other long term purchases.
Reason being is that theyre hard to get online due to size, delivery etc.
Having said that, these items probably wouldnt make more than 20% of their sales im guessing.
Its the smaller everyday type items I bet that stores like JB Hi-Fi were doing so well in, ie ipods, cameras, movies, etc

Not even movies. My friend told me he goes there just to check out what to download. And when I told other people that I couldn't find a movie there, they all told me to download it.

 

[Garpal Gumnut]

The chart looks pretty crook, lower lows and lower highs.

It will need to get a move on volume wise sideways + or - up with a price rise before I would look at it.

gg

 

[Nutmeg]

I think the bricks and mortar type stores have the advantage when it comes to larger consumer goods, ie white goods, large tv's or other long term purchases

I agree to an extent. However, one of the consequences of price transparency is that consumers are increasingly using bricks-and-mortar retailers as mere showrooms of the goods that consumers want to buy and then purchasing the identical item online at a cheaper price. I don't immediately see why bulky whitegoods, say, will be spared that fate any more than CDs and DVDs, the retailers of which are already experiencing it. There is simply no way that HVN with its enormous overheads relative to an Amazon-like online retailer is going to be able to compete on price in the long term.

 

[McLovin]

Here are a few comparison (from WebIress).

Code / Trailing PE / Div yield / Price to Assets

DJS / 8.36 / 10.14% / 2.03
MYR / 8.47 / 9.7% / N/A
HVN / 8.84 / 5.71% / 0.96

JBH / 14.74 / 5.13% / 26.32 (before today)

Our old friend PE compression is alive and well. It made no sense for JBH to be on that multiple, as if it was somehow immune to the retailing downturn. JBH reporting today that profit will be up to 9% lower than last year.

 

[odds-on]

I am tempted to open a CFD account to start taking a leveraged long position on this stock. Div yield > PE ratio, everybody is down on JBH and apparently it is the most shorted stock on the ASX. What more do you need to know?

 

[Ves]

Our old friend PE compression is alive and well. It made no sense for JBH to be on that multiple, as if it was somehow immune to the retailing downturn. JBH reporting today that profit will be up to 9% lower than last year.

I agree that PE compression was needed, however of those businesses with P/E listed in the post that you quoted do you think any of the others are close to having a 'competitive advantage'? It remains to be seen whether JBH is a true low cost competitor, the blackest times are probably still ahead, but if it does have such a competitive advantage it may be worth watching the margins (and possible recovery) over the next 12-18 months. Another wave of capitulation selling might make it compelling.

 

[skc]

I am tempted to open a CFD account to start taking a leveraged long position on this stock. Div yield > PE ratio, everybody is down on JBH and apparently it is the most shorted stock on the ASX. What more do you need to know?

This is the perfect plan for disaster. Please don't do it. If you must buy this stock, buy it with money you have and take a loss on the next profit downgrade.

Don't leverage without a stop. Because crazier things happen in the market... and JBH keeps falling would not be considered crazy at all.

Still can't believe it dropped to ~$11 tbh

Like this... it's pretty hard to believe now, isn't it?

I agree that PE compression was needed, however of those businesses with P/E listed in the post that you quoted do you think any of the others are close to having a 'competitive advantage'? It remains to be seen whether JBH is a true low cost competitor, the blackest times are probably still ahead, but if it does have such a competitive advantage it may be worth watching the margins (and possible recovery) over the next 12-18 months. Another wave of capitulation selling might make it compelling.

Here's is a quick anecdote on competitive advantage.

There are 4 items on the JBH online shop, front page. I am going to search for same items online elsewhere and see what competitive advantage JB has.

1. Soniq 46" HD LED LCD TV (E46Z11A), $698.
Selling for $699 at Penta.com.au.

2. Teac 26" LCD Combo TV (1366x768), $299.
Selling for $309+$18 delivery at Billy Guyatts.

3. HP Pavillion 15" Notebook (G6-1310AX), $598.
Same price at officeworks.

4. Nikon J1 10-30VR (white), $646.
~$520 on ebay. $314 at Becextech. (Crazy price actually).

Competitive advantage = zilch.

It is scary that the CEO said in the recent trading update...

We anticipate that this level of discounting will continue over the next quarter but we do not believe that this is a long term structural change

The forecast is for full year sales of $3.1B (H1 = $1.77B) and NPAT of $100-105m (H1 = $80m). This means JBH forecast to make a tiny $25m in H2. With H2 NPAT of $25m, you can back out the EBIT to be ~$25/0.7 + $5.5 (interest) = $41m, so EBIT margin is now 3.1%.

If they match their competition on price above, there will be no EBIT margin left. If they don't match the price, they will either have to drive down costs (of which they were good at but you wonder how much further can they do it), or lose market share.

New store opening has already slowed. There were 157 stores at end of FY11. Target for FY12 was 172 but there are only 161 open as of last up date. Without increasing scale it's hard to drive the CODB down.

If margin doesn't improve (and I for one see no season why it would improve), you can easily see full year FY13 NPAT ~$60m, which puts JBH on a much over-valued PE multiple of 15-16x at today's prices.

 

[Chasero]

Yep, I cut my losses with JBH a while ago.. hit stop losses

Market is telling you one thing: it's shorted by a good % for a reason.

Market is always right. Learned big time from that trade.

 

[notting]

I am tempted to open a CFD account to start taking a leveraged long position on this stock. Div yield > PE ratio, everybody is down on JBH and apparently it is the most shorted stock on the ASX. What more do you need to know?

People were saying stuff like that when it was 17.
Take a look at the history of WAN, now SWM, came from about there and is now 3!

Simply because it suddenly appears compelling using historical multiples compared to current and hoping that the forward projections are still dependable is a stretch in an environment that has changed dramatically for retail and advertising - which do have a close relationship.

Social media and consumer discretion has made giant leaps in terms of how impulse buying is now a very different animal to feed as instant alternatives appear for people, even reviews which alter their behavior!

Hence the old controls have become unreliable using traditional marketing techniques and so have the subsequent behaviors of consumers, not to mention the massive increase in alternative places and ways to get what you want at even cheaper prices.

What is a successful model in this new environment? We still can't argue with Apples numbers and ability to appear unique with cult like seductive quality carefully controlled and crafted from production to sale!

'Times still are a changen' like the suits to 60s and it's hard to pick 'who that it's naming!!'