Earnings before interest, tax, depreciation and amortisation (EBITDA) were also up 4.2 per cent to $429.1 million, beating consensus expectations of a more modest 2.3 per cent increase.
We are still Australia’s largest seller of CDs and music, it’s still worth a couple hundred million to us. I appreciate its not growing but that is what it is.
JB Hi-Fi chief executive Richard Murray
Shares in the retailer rallied strongly, closing 10 per cent higher at $30.75.
Mr Murray said he is “cautiously optimistic” heading into 2020 and the all-important Christmas trading period.”I feel a lot better about where the consumers at and the economy is at today than I did in April,” he said.
Analysts said the company had broadly outperformed, but also remained cautious. Morgan Stanley analyst Niraj Shah said JB Hi-Fi’s sales had “remained surprisingly resilient” into July, but was less bullish on the company’s whitegoods retailer The Good Guys.
Credit Suisse analyst Grant Saligari also remained cautious, saying while the company outperformed, it did so “very narrowly”.
“There are a number of pressures throughout, such as gross margins being down and cost of sales being up, both of which are structural changes,” he said.
He also said Good Guys would likely be a “slow recovery” for the retailer, especially considering a “strong” competitor in Harvey Norman. Mr Saligari also said he couldn’t foresee any quick bounces back in consumer spending in the near future.
“As we stand now, there’s very little sign consumer spending is increasing. Any optimism is based in the hope some tax stimulus will eventually improve consumer spending, but consumers themselves are also becoming more cautious,” he said.
Like-for-like sales for JB Hi-Fi Australia were up 2.8 per cent for the year, with June quarter sales up 3.3 per cent. The start of the current fiscal year was also strong for the business, with comparable sales for July up 3.2 per cent.
The company’s final dividend was up 4c to 51c, payable on September 6 and bringing the full-year dividend to $1.42.
Sales growth was dominated by hardware and services, and let down by software such as music and movies, which declined 8.3 per cent. But this wasn’t a concern for Mr Murray, who said: “it is what it is”.
“The harsh reality is that’s where the business is for us at the moment. Software’s been declining year on year for a long time for us, and I anticipate that will continue,” he said.
“We are putting out best foot forward and we are still Australia’s largest seller of CDs and music, it’s still worth a couple hundred million to us. I appreciate its not growing but that is what it is.”
The not-so-Good Guys
The Good Guys, which JB Hi acquired for $870 million in 2016, posted like-for-like sales growth of just 0.9 per cent for the year.
For the June quarter, sales slid 0.7 per cent, and for the month of July they were down 3.4 per cent, though EBIT for the year was up 19.8 per cent to $72.9 million.
Despite this, Mr Murray was still bullish on the business, saying “all things considered” the company was outperforming in the difficult home appliance market.
“It’s harder for those business models to attract traffic as they’re very destinational,” he said.
As we stand now, there’s very little sign consumer spending is increasing.
Credit Suisse analyst Grant Saligari
“JB Hi-Fi is lucky, we have traffic that’s shopping centre-based, whereas, for many of the home appliance players the traffic’s really hard to get, they’re more weekend destinational.”
The company’s New Zealand operations continued to struggle, with the 14 stores across the Tasman reporting an EBIT loss of $1.9 million, though sales increased two per cent.
Mr Murray provided limited outlook for the coming financial year, pointing to potential variables and predicting slightly more subdued revenue growth of 2.1 per cent to $7.25 billion for 2020.
Mr Murray also said the housing market looked more positive moving into 2020, which he hoped would correlate with a stronger performance for The Good Guys.
“Ahead of the federal election we probably underestimated how strongly a number of groups felt about where [issues like] franking credits were at, and post the election they would be feeling a lot more confident,” he said.
“I think in the medium term, all things else being held constant, they are more confident about the outlook, and that’s good for retail.”
Dominic Powell writes about the retail industry for the Sydney Morning Herald and The Age.