JBH - JB Hi-Fi

[skc]

With regard to JBH's EBIT margins - does anyone have a good idea of why the HY is usually ahead of the FY margin?

For example FY13 was ~5% while both HY13 HY14 were both ~6.8%.

Random thoughts are:
- It is related to the holiday period where JBH has increased turnover and can push suppliers even further?
- Or is it that in the non-holiday period that they are forced to discount prices further in order to keep volumes moving?
- Or is it a reflection of the product mix that is sold during the holiday period which are higher margin products?
- Something completely obvious that I am missing????

All due to higher turnover during the holidays. It's just operational leverage - sales increases while fixed costs stay the same.

 

[VSntchr]

All due to higher turnover during the holidays. It's just operational leverage - sales increases while fixed costs stay the same.

Got it, cheers.

 

[McLovin]

How does JBH replace that cheap foot traffic they used to get in the door for music, movies and games? No one is saying "Hey, Joe, let's go check out that new Westinghouse side-by-side". That, IMO, was their big advantage over everyone else, and it will be hard to replace. That's probably why the comparisons to Best Buy keep being made.

The move into whitegoods seems to be acceptance that while less profitable, it is far more insulated from the internet than their traditional lines.

 

[notting]

That's the ball game.
The heat is where the teens are.
It was the Ipod that revolutionized and made Apple, Jobs was very smart to morph it into the Iphone, then the peace of crap that is the Ipad.
JB tried with it's streaming now it's going for Edna Everage with it's washing machines. Hasn't done much for Woolies yet. JB your back in the pen.

 

[McCoy Pauley]

Full year results out this morning. I haven't perused them as yet (been busy with my day job) but the market seems disappointed - the stock has been dumped to the tune of an almost 8% decline in the first half hour of trade.

Not sure whether that represents a good entry point until I get the chance to go through the results.

I hold, so DYOR.

 

[Junior]

Hmmm met guidance and market expectations, yet down 8%.

Does this result mark the transition of JB from a 'growth' stock to an 'income' stock? They expect to only open 8 new stores in the coming year and are focussing on their 'JB Home' stores... I guess this is a whitegoods type setup, based on what I saw in their Brighton (VIC) outlet recently.

 

[Junior]

Morgan Stanley says:

FY14 result at upper end of guidance range: JBH
reported FY14 NPAT of A$128.4m, at the upper end of
guidance for A$126-129m. We believe this is a
commendable result given weak industry-wide trading
during 4Q.

Outlook statement disappoints: JBH has guided to
FY15 sales of A$3.6bn (consensus A$3.7bn, MS
A$3.75bn) based on weak expected tablet sales. We
believe the guidance is conservative and reflects the
weak start to FY15 trading through July.

FY15 trading YTD: July trading performance appears
weak (sales growth -3.2%, LFL -5.5%) based on weak
tablet sales. Encouragingly, gross margins are above
pcp levels which implies that consensus earnings
downgrades should be limited.

Capital management initiatives positive: JBH has a
permanent lift to its dividend payout ratio from 60% to
65% (MS 70%, Consensus 60%). Further, JBH will
continue to buy back shares to offset dilution from the
share option plan.

 

[McCoy Pauley]

Yep, I think Morgan Stanley nailed it. A very good 2013/2014 result based on my read-through this morning but the outlook looks soft - a combination of a poor set of July sales figures and concern over the ongoing transition into the JB HOME channel.

Interesting to read that online sales growth in the 2013/2014 year continued, now making up 2.2% of the group's revenue, compared to 2.0% the previous year. Hopefully JB Hi-Fi can continue to build that part of its business.

 

[db94]

Everyone was expecting their results to meet the forecasts. Classic example of buy the rumor, sell the news. Huge funds will/have dumped their stocks on those who invest based on the news, forcing the price down and then they can buy it back at a bargain later. Wait for the shorts to dry up and then look to enter. Watch the gap close. This is all IMO though

 

[skc]

The Fy profit guidance was last reaffirmed on 19 Jun, so it'd be really surprising if they didn't meet it.

Today's fall is all about the weak July LFL update... I really don't know how much that 9 weekend days vs 10 weekend days mattered. If they think that was the contributing factor they'd quantify it more clearly in the "Trading Outlook" sector. The FY15 revenue of $3.6B is also on the light side of analyst forecasts. At this lower revenue, they'd have to increase profit margin to meet the market's EPS expectations.

It's also interesting to note that most of the growth will supposedly coming from HOME... which probably makes increasing margin even more challenging.

The chart is looking interesting. It's sitting at a pretty important level. Will it hold this time?

 

[galumay]

Everyone was expecting their results to meet the forecasts. Classic example of buy the rumor, sell the news. Huge funds will/have dumped their stocks on those who invest based on the news, forcing the price down and then they can buy it back at a bargain later. Wait for the shorts to dry up and then look to enter. Watch the gap close. This is all IMO though

I must be having a blonde moment, but you say, "Classic example of buy the rumor, sell the news." which I take to mean the average punter bought on the rumour and are now selling on the news, then you go on to say, "Huge funds will/have dumped their stocks on those who invest based on the news, forcing the price down and then they can buy it back at a bargain later" - which leads me to question who exactly is buying on the news?? Secondly if its the huge funds that have dumped their stock then how can they buy it at a bargain later? Havent they sold at a bargain price?

Seems more likely to me that its simply a case of due to the news, buyers have dried up at the current price and sellers are selling at lower prices out of fear of a further dropping price.

 

[notting]

Hard to increase margins when competing with Woolies, internet, Dick in ear (I mean Dick Smith float) and a weakening Ausi $.
But still as gooda chance as any brick an mortar store and I bought a washing machine off the net a few years back, I won't be doing that again!

 

[McCoy Pauley]

I'm not a technical trader, but it looks to me that JBH has either just or is poised to break down through support based on yesterday's price action.

 

[sammy84]

Need to look at my charts tonight but should be some bullish divergence developing soon. Would need to see a strong close to be interested though.

 

[TPI]

I think the market reaction to JBH's results is an overreaction.

Tablet sales declines are not exclusive to JBH.

And product innovation occurs in cycles, this is given.

i-Pad Air 2 (10") is coming soon and next year maybe a 12" i-Pad Pro (think i-Pad/notebook hybrid)...

i-Phone 6 is also coming soon with big Samsung-sized screens...

i-Watch thingy is also coming soon...

And in time other products will also be developed that we didn't know we needed.

And, Apple share price just hit $100 this week:

http://www.smh.com.au/business/reta...imism-about-new-products-20140820-1063g7.html

JBH's diversification into home appliances also makes sense to me, all these products are getting more techy and connected these days.

I also don't think any other retail discretionary stock has done as well as JBH in terms of rewarding shareholders with dividends, having increased 1200% from 7cps in 2004 to 84cps in 2014 (and only decreasing once in 2012).

Sure there will be competition from DSH and other online channels, but I think JBH has the runs on the board to deal with these competitive threats.

I think the average person will still generally prefer to purchase from a known and trusted brand and with the option to try before you buy at a retail storefront, rather than through eBay or other online only sites.

 

[TPI]

Interesting article below with stats:

http://m.idc.com//pressRelease/prUS24890514

Note commentary quoted below about bigger-sized smartphones and larger devices like Microsoft Surface Pro 3 (Microsoft's 12" tablet/notebook hybrid currently in the market, with Apple's version not made/released yet):

"In the past year alone, the phablet share of smartphone shipments has more than doubled, from 4.3% in the first quarter of 2013 to 10.5% in the first quarter of this year, representing 30.1 million units shipped. As large phones clearly impact near-term tablet growth, IDC expects the market to rebound by shifting its focus back toward larger-screened devices. Products with larger screens--like Microsoft's new 2-in-1, the 12-inch Surface Pro 3— are expected to play a greater role in the market going forward.
"The shift back toward larger screens will mark a welcome sea change for most vendors as the average selling price for these devices will remain roughly 50 percent higher than the average sub-8-inch device," said Jitesh Ubrani, Research Analyst, Worldwide Quarterly Tablet Tracker. "Microsoft is also expected to benefit from this shift as the share for Windows-based devices is expected to double between now and 2018."

 

[TPI]

Just thinking out loud, JBH effectively gives you exposure to the retail sector, technology sector, housing sector (via JB Hi-Fi Home), and also commercial/business 2 business sector (via JB Hi-Fi Commercial).

Disclosure: Long JBH so all commentary may be wishful thinking!

 

[Garrett]

Will be interesting to see how the Home stores go.

Some of the pimpled face teenagers who bought CD's, gadgets and computer games over the last decade are now first home buyers and will need appliances.

 

[TPI]

Will be interesting to see how the Home stores go.

Some of the pimpled face teenagers who bought CD's, gadgets and computer games over the last decade are now first home buyers and will need appliances.

That's true.

Also looking back at popular products of the past, eg. the hi-fi, stereo, video recorder, walkman, discman, DVD-burner, i-Pod, sat nav etc., the current generation of young kids may not even know what these are.

Technology is always changing and the company that can continue to maintain good EPS and DPS growth in the face of this by moving to newer and evolving product lines is doing well.

 

[tech/a]

Disclosure: Long JBH so all commentary may be wishful thinking

Long since?

How long will you remain long?