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Despite the lockdowns, JB Hi-Fi continues to show the strength of its brand

Despite the lockdowns, JB Hi-Fi continues to show the strength of its brand

The past few months have been tough for most retailers so it was heartening to see JB Hi-Fi’s first quarter 2022 sales results. Despite having to shut over half its stores during the period, the electronics and white goods retailer only reported a small drop in year-on-year sales. With the economy – and stores – opening up again, the numbers point to another strong year.

With so much variability in trading conditions during lockdowns and afterwards, it should come as no surprise that a heightened awareness and sensitivity now exists during AGM season.  Consequently, AGM season has become a mini reporting season offering important insights into trading conditions as Victoria and New South Wales emerge from lockdowns and ahead of the important Christmas trading period, especially for retailers.

JB Hi-Fi provided an update at its recent AGM. Given the company’s penetration into Australia’s homes and wallets, the update offers some read-through for retailing generally.

Remembering JB Hi-Fi reported a huge surge in sales this time last year, first quarter FY22 like-for-like (LFL) sales for JB Hi-Fi Australia were down 7.9 per cent. But like Adairs and Super Retail Group before it, JB Hi-Fi’s sales remain higher than pre-pandemic levels of two years ago.  JB Hi-Fi’s 1Q22 sales were 17.3 per cent higher than the first quarter of FY20.

It is also worth keeping in mind JB Hi-Fi stores were closed during NSW’s lockdowns in the first quarter this year, while they were not closed during the same period last year. And in Victoria, Melbourne stores were shut in both comparable periods. The result is therefore commendable with some credit being attributed to the timing of new product launches.

JB Hi-Fi’s other brand, the Good Guys, reported LFL sales down 6.1 per cent versus the same period last year, but up 22.9 per cent versus the pre-pandemic period of the first quarter FY20.  Keep in mind Good Guy sales were up almost 31 per cent during the comparable period last year, so a six per cent decline this year against that number is commendable.

JB Hi-Fi reported conditions in New Zealand are not as robust as on this side of the ditch, with first quarter LFL sales down 6.4 per cent compared to last year and also down 8.8 per cent compared to the first quarter of FY20. The result can almost be entirely attributed to the timing of Auckland’s extended lockdown.

With so much of the market’s focus on margins, and with expectations margins will ease compared to last year, it is somewhat disconcerting JB Hi-Fi made no comment about group margins. Market hopes are that retailer margins may decline against FY21 but will remain above FY20.

The Montgomery Small Companies Fund owns shares in Adairs and Super Retail Group. This article was prepared 29 October 2021 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade these companies you should seek financial advice.


Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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  1. I believe the global chip shortage will pull forward sales for JB Hi Fi in 2022 while also improving margins.

    People are learning that if you want the latest tech, you have to order early.
    Supply shortages means that JB Hi Fi doesn’t need to discount – their entire allocation will sell at RRP. JB Hi Fi has the market power to demand outsized allocations from manufacturers while their “grey market” competitors will be unable to source products to compete.

    Finally, union action and covid-safe measures will continue to disrupt the logistics sector. This will encourage more people to buy in-store rather than risk extended delivery delays.

    • Thanks Ricky, I am currently penning an article for my fortnightly column in The Australian’s Wealth Section, which will be out this weekend. I note the following “One of the major causes of the spike in commodity input prices, amid a resurgent global economy, was the supply chain bottlenecks referred to, back in April, by the US Federal Reserve’s Jerome Powell.

      Back in April, when Jerome Powell, now famously, indicated inflation would rise but be transitory, he specifically called out an eventual easing of supply-chain bottlenecks. Importantly, that process now appears to be commencing, supporting economic growth and offering another potential tailwind for equity markets.

      Take the chip shortage produced by semiconductor manufacturers that complicated the manufacture and delivery of a wide variety of products from passenger vehicles to smart watches and phones; So severe was that shortage, thanks in part to demand by crypotocurrency miners, that new car deliveries were delayed by up to a year and some brands were forced to shutter production.

      Random Access Memory (a subset of the chip market) prices however are now declining. As at 5 November, the spot price for 2GB DDR3 chip in US dollars had fallen by almost a third from recent highs.

      Perhaps more tellingly, car manufacturers have observed easing chip supply conditions,in their third quarter earnings reports. By way of example Ford noted,“Semiconductor availability remains a challenge, but markedly improved from the second quarter”. And Toyota reaffirming full year production targets suggests the production cut in November is seen as temporary.

      Another indicator of supply chain disruption has been skyrocketing freight costs amid surging lockdown-related demand from online shoppers and consequent port delays. The cost of freight as measured by the Baltic Dry Index soared almost 14-fold between May 2020 and October this year. But since its highs in October the Baltic Dry Index has plunged 50 per cent suggesting pressure on the cost of shipping dry bulk commodities at least is now easing.”

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