JBH - JB Hi-Fi

[McCoy Pauley]

I went to buy a video camera on the weekend. I started my search in JB Hi-Fi (JBH) because I've always found the staff to be knowledgeable and have good deals. The camera I want was listed at $398 and the sales assistant said they could do it for $367. He was not at all knowledgeable or helpful.

I got out of there and ended up buying the identical camera up the road at Harvey Norman (HVN) for $333. This included a bonus carry bag and battery. The girl there was very helpful and did know her stuff.

Certainly this could be a one-off experience and I'm cautious about reading too much into it.

But for the first time in 7 years I'm feeling bearish about JBH.

Anyone have any other similar (or contrasting) experiences they can share?

I've had experiences consistently with JB Hi-Fi over the past 5 years which indicates that customer service does not appear to be high on the list of priorities of the executives running the company. Routinely, I've had to go hunting for people to help me with a query or a product sale.

The most recent occurrence was about 18 months ago when I was looking to purchase a present for my wife for Mothers Day. Despite a number of customer service staff present in the area of products I was interested in, not one offered to assist me. I walked out of JB Hi-Fi and bought the same product (cheaper) at Myer.

I haven't shopped at JB Hi-Fi for years now, I reckon. I think the culture changed when the company listed.

Disc - do not own shares in JBH.

 

[ROE]

I used to buy my electronic stuff from JB but lately I found them no longer

competitive and they dont drive a hard bargain any more and their staffs

quite arrogant when we get down to price negotiation.

Too much success lead to complacency.

I thought I was the only one feeling that way but the culture may have changed.. I now shop at the good guys and these guys do want my business and try to make an effort selling at a decent price...and officeworks always has lower price on HDD and whatever else they stocks in electronics
and accessories

 

[justiceotp]

OK to fill you in then JB HiFi did a shocking job that is a bonus is supplied by JVC to the retailer to give to you free with purchase, but if HN didnt inform you of the extra bonus Ipod dock sound system via redemption then they didnt do much better but did get your sale. go to www.jvc.com.au to claim your dock after you pay $20 freight and also your extra 1 year bonus warranty.

 

[condog]

Sorry guys but i dont think the rest of Australia agrees with you....

Its the fastes grwoing retail chain in australia...it powered through the GFC ...

Go into any westfield and JBH is the busiest store by more then double...

 

[McCoy Pauley]

I think JBH does a good job at marketing itself to Gen Y shoppers and gets them through the door day after day. JBH does well in selling DVDs and CD-ROMs, but for any entertainment product, I'd look elsewhere (Good Guys is a good place to start, in my experience).

I haven't experienced this personally, but I'm aware of a number of different people that have had bad experiences purchasing goods from JBH online (ie., goods that have never shown up).

 

[condog]

I hear what you say, but i purchase a truck load off them and couldnt be happier.... in fact the only thing i hate is there stores are so busy that i have to wait in line for the checkouts....

So lately i do a lot on line...when they have music and dvd specials... got an awesome 15' new hp dual core laptop for $491 just after xmas from jbhifi online... and now scanning to try and find another one pop up for that price or similar...for the kids...

I love em and i think the numbers tell the story...... any way each to there own... certainly as a stock its a fantastic stock to own.....from a fundamentals point of view it is sensational, and right now as ive calced it its also $2 under value.... low div, but thats calced in to my value....and when they keep giving approx 20% p.a. compound sp growth ... a 1.5-2% dividend is very acceptable.... theres stillplenty of store roll outs happening and store sales are still increasing....while costs are being maintained and in a lot of cases lowered...

DYOR this is all opinion...seeek expert advice...

 

[justiceotp]

The thing you have left out is the MARGIN it has decreased dramatically in December. They have indicated they are going to remove themselves from GFK figures so you wont be able to get market share figures anymore probably been the major driver of share price. Its not always the best thing to grow the number of stores especially if the existing stores start to reduce the amount of profit they are generating, remember new stores are usually a drain on your costs even at the best of times.

 

[DocK]

I've had experiences consistently with JB Hi-Fi over the past 5 years which indicates that customer service does not appear to be high on the list of priorities of the executives running the company. Routinely, I've had to go hunting for people to help me with a query or a product sale.

The most recent occurrence was about 18 months ago when I was looking to purchase a present for my wife for Mothers Day. Despite a number of customer service staff present in the area of products I was interested in, not one offered to assist me. I walked out of JB Hi-Fi and bought the same product (cheaper) at Myer.

I haven't shopped at JB Hi-Fi for years now, I reckon. I think the culture changed when the company listed.

Disc - do not own shares in JBH.

I have had the opposite experience. Went to buy a new TV and PVR from Harvey Norman and must have got the worst salesman alive. He knew less about his products than I did (which wasn't heaps) and constantly interrupted either us or himself to wave at friends, talk to other staff etc. We then went to JBH where a young guy was very informative, polite, helpfull and we negotiated a better price than at HVN.

I have received good service and prices at both stores in the past, but find at Harvey's it's a bit hit and miss depending upon which section you're shopping in, or maybe just the particular salesman you deal with (when you can manage to grab one). In my area Harvey's salesstaff are mainly late 20's to middle-aged and dress conservatively, whereas JB staff are mainly young and tattoos etc are almost mandatory. Maybe it's just me, but if I want a fridge, washing machine etc I'll head to Harvey Norman, but if I want techno stuff you can't beat the youngsters for knowledge. The kids use it, know it and can explain it better I find.

Don't own shares in either atm, but had a lovely run with JBH for a while

 

[Uncle Festivus]

It's all about margin I think. JBH used to be the most expensive from my dealings with them, hence the good profit/growth over the last few years? I think the scene is different now with cut throat competition on threadbare margins ie bought a PVR from Myer recently for $895, all others were qouting $1195, JBH didn't want to even haggle.

On a peer/index basis, JBH is fully valued? Clearly in downtrend?

 

[McCoy Pauley]

I have had the opposite experience. Went to buy a new TV and PVR from Harvey Norman and must have got the worst salesman alive. He knew less about his products than I did (which wasn't heaps) and constantly interrupted either us or himself to wave at friends, talk to other staff etc. We then went to JBH where a young guy was very informative, polite, helpfull and we negotiated a better price than at HVN.

I have received good service and prices at both stores in the past, but find at Harvey's it's a bit hit and miss depending upon which section you're shopping in, or maybe just the particular salesman you deal with (when you can manage to grab one). In my area Harvey's salesstaff are mainly late 20's to middle-aged and dress conservatively, whereas JB staff are mainly young and tattoos etc are almost mandatory. Maybe it's just me, but if I want a fridge, washing machine etc I'll head to Harvey Norman, but if I want techno stuff you can't beat the youngsters for knowledge. The kids use it, know it and can explain it better I find.

Don't own shares in either atm, but had a lovely run with JBH for a while

Yeah, I'm not a fan of Harvey Norman either. Their customer salespeople are generally, on the whole, not very knowledgeable about their products and their prices always seem to be very high. They always push their no interest free deals which must account for a high proportion of their sales.

I generally get our electronics and white goods from the Good Guys and, very occasionally, Clive Peeters.

 

[lianeisme]

I am not a fan of Harvey Noman either I currently hold JB Hi Fi. Stock I bought the stock because I liked their business model.
I personally have found them to be a much more interesting shop and have always got great deals. I usually buy white goods from the Good Guys or Clive Anthony.
In regards to service I think all shops in Australia need to pull their socks up whether it be K Mart, Target , Myers, David Jones and so on we are the worst in the world for service. All shops appear to be understaffed and the staff are disinterested.
I have found Harvey Norman to be very hard to deal with if you have faulty stock or to return product that is not suitable. Because of this I don't buy anything that can break from them. I use them as my base to start to get the best deals.

I was wondering as a stock where you all think JBH is going to go over the next two years, it appears the stock brokers are very bullish in regards to them however their price per share in comparison to their competitors is substantially different. What is your opinion?

 

[skip9]

While i dont own JBH stocks, i have been watching for a long time.
Personally i think they will continue to grow, not at the rate as they have but slow and steady. I am pretty sure they are opening another 50 odd stores in June this year.

 

[condog]

I subscribe to a valuation service that charges me a lot of money to value these comnpanies ...it has JBH presently valued at $23.50 and thats based on July 09 trading figures.....i expect a re valuation very soon , with 6 months good trading under there belt and little dividend to rob the growth on this one...

No matter what criterea other then Yield i filter for good results, JBH comes out in the top few performing big busineses that i can find....

Also Roger Montgomery who i very much respect, but who is also a very conservative expert valuer on these types of busines absolutely loves JBH and has it valued at $23 this year, $28 next year and $33+ the following year....

Sorry to be blunt and i hope no one is offended, but seriously other then a low yeild, the merits of JBH as a good investment do not warrant at present any questioning.....

 

[So_Cynical]

Sorry to be blunt and i hope no one is offended, but seriously other then a low yeild, the merits of JBH as a good investment do not warrant at present any questioning.....

Chart looks very toppy to me, JBH certainly has had a great run and was value, but its hard to see it continuing to go up at the rate it has over the last 12 months....falling volume and the crappy dividend yield point to sideways movement over the next 12 months IMO.

Besides as others have commented on...JB HI-FI seem to be everywhere now and can be considered as just another electronics retailer that has a better than average range of music and videos...i know some people love charts that look like this, i hate em cos all i see is where i should of brought, anyone buying now has clearly missed the boat.
~

 

[condog]

No doubt growth will be more subdued going forward, thats nearly always the case that growth cannot be replicated as well in mature companies.....but that does not mean that long term good growth will not be achieved....
Clearly when JBH started out it got to put its stores in all the finest locations ...and now with stores approaching 120ish or so its got good targets for 160 stores and aims to go to 200 stores....beyond that surely growth will taper as store locations become lower quality.....but thats about 3-4 years away...

Take a look at these graphs which are from the AGM in OCT 2009 and do not include the wonderfull xmas trade they just had and then honestly tell me they are doing something wrong....

Other then tiny speccies with higher risks - no one in here would have a mid cap that has done so consistently well.......and if you claim you do please include a picture of its graph...

Im not sure about you but thats an OUTSTANDING result and beyond questioning by anyone.....

The above graph shows its not just another electronics store...HVN has nothing like the growth, not even remotely close.....HVN had a good year this year due to the Rudd Plasma money, but thats about it.....on the flip side JBH has a string of fantastic, outstanding results and more to come...

Dividend of 44c up 69%....now thats a good increase as well....but JBH achieves and ROE of approx 48% so why would you want it to pay you the money in dividend....when it can get 40% on your money for you....
When its rolling out 20 odd stores a year and continueing to achieve 40% roe I would like it to keep every cent....

And with a rapidly expanding population to 39M things are likely to be better..

Honestly anyone bagging JBH for its coorporate performance has no idea what a good investment is....debate is fantastic, but please do some research if you claim to know stuff, otherwise ask and you shall recieve...

 

[condog]

Further people in here have falsly or naively claimed JBH is losing its competitive edge...this is false

It lowered its CODB from 15.3% to 14.9% and is an industry leader in this by over 4% and importantly at the same time its EBIT and NPAT increased significantly...

Unlike the other electronic retailers JBH has a focus on personal enetertainment and has selective product offerings within this category....Most other chains offer the full sweet of electronics including brown and white goods which have lower margins and are far more susceptable to economic cycles....

Hence the reasons why JBH is extremely different and far more profitable...they are a smarter business, with a better business model and are far more profitable....

JBH has recognised and targeted personal enetertainment, because it is now almost a necessity in most households....in terms of weekly budgets personal entertainment is the fastest growing area of spending....

I never fall in love with any stock, it owes me nothing, but from a fundamental view point JBH is a super star performer.........and nothing in its immediate outlook thats under the companys control is likely to change that....

 

[skc]

Further people in here have falsly or naively claimed JBH is losing its competitive edge...this is false

It lowered its CODB from 15.3% to 14.9% and is an industry leader in this by over 4% and importantly at the same time its EBIT and NPAT increased significantly...

Unlike the other electronic retailers JBH has a focus on personal enetertainment and has selective product offerings within this category....Most other chains offer the full sweet of electronics including brown and white goods which have lower margins and are far more susceptable to economic cycles....

Hence the reasons why JBH is extremely different and far more profitable...they are a smarter business, with a better business model and are far more profitable....

JBH has recognised and targeted personal enetertainment, because it is now almost a necessity in most households....in terms of weekly budgets personal entertainment is the fastest growing area of spending....

I never fall in love with any stock, it owes me nothing, but from a fundamental view point JBH is a super star performer.........and nothing in its immediate outlook thats under the companys control is likely to change that....

Great historical analysis condog. Thanks for sharing.

I don't think anyone can argue about the historical performance of JBH. And history is often a good guide to future performance as well. People have merely pointed out some anecdotal evidence of whether shopping at JBH is a pleasant experience or not. This may or may not be significant, but management and investors should ignore customer feedback at their own peril.

Having said all that, all these figures don't conclude whether JBH is a good investment at today's prices. I think everyone agreed that the growth cannot continue forever. If the current valuation is based on similar growth for another 5 years and flatter growth thereafter, then that seems fair. If the valuation is based on 40% growth forever then I will get a bit skeptical.

Here's my back of envelope valuation.

Current EPS = 88c. Say 2 years of 40% growth followed by 3 more years of 20% growth. Year 5 EPS ~$3. As growth is slowing, market may only apply a PE ~16 (Something like a DJS multiple), this gives a share price of $48 in 5 years. Discount $48 back by 12% to today's dollar makes ~$27. So today's price of $22, on these assumptions, are not overvalued. It is up to the individual investor to decide whether these growths are attainable.

In fact at current price of $22, market is pricing ~22% EPS growth for the next 5 years and PE ~16 thereafter. To me this doesn't sound ridiculous based on their performance record.

 

[condog]

Its value as an investment was called into question very clearly......and its the one stock all the commentators and analysits agree is the darling of the market.....especially looking forwards.......

All I say to the punters is DYOR and make your own decisions, but JBH IMO and in every analyst i have heard comment , every fundamental valuers opinion a great stock....

The figures above show it, the declining CODB, show it, the NPAT and EBIT confirm it......the continual profitable store roll out says it...

What more does anyone need say???????

 

[justiceotp]

"Unlike the other electronic retailers JBH has a focus on personal enetertainment and has selective product offerings within this category....Most other chains offer the full sweet of electronics including brown and white goods which have lower margins and are far more susceptable to economic cycles...."

They do browngoods TV's are the worst margin in all browngoods and if they don't do whitegoods who owns Clive Anthony, better do some more research.

 

[bluemoon]

Interesting reading....
What state are the JBH stores that people find sales people arrogant or prices not competitive enough???
Perhaps email JBHfi management with concerns - it can only help them...

I LOVE JBH. Am not a holder of stock currently as have been watching it rollover lately. But it is still my pick of the whole retail space. Tech chart - Macd just showing a buy on daily chart now so I may have to re-enter JBH soon.

In regard to my dealings with HVN MYer and JBH and Kathmandu as a comparison this xmas... Perth WA.

Myer IMPOSSIBLE to get a cashier to pay at Cannington shop - really bad and staff under pressure - (even crying) over xmas time. Since the IPO heaps more discount offers with MyerOne card than ever before and prices more competitive this xmas. Had 20% day even. I bought there over xmas time although left in disgust at staff levels one occasion.

JBH - young sale people - got heaps help re:laptops Cannington, Perth staff. Far better staffing levels than Myer over xmas and really helpful staff. Bought there over xmas - best dvd game selection for my teenagers at home.

HVN - don't go there except furniture. Too expensive in my experience and not willing to deal. Did not purchase there this xmas.

Kathmandu - best for decent sweatshirts that last a lifetime. Bought vest xmas time.
Summary....
MYER best cut prices this year and 'old mans pants' retailer (BOUGHT CLOTHES FOR MY OLD MAN THERE).
JBH best DVD and gen y retailer.