It's crunch time for Australian retailers. Can they end the year with a gift from Santa or visit from Scrooge?
Here's why the stock below could well be in store for higher sales and potential earnings now and into 2015.
A Commbank survey of 1,000 people indicated the average consumer may spend a little less this Christmas holiday season than last year, so retailers may have to sharpen their pencil on prices to lure shoppers in.
Equally important, the level of holiday shopping sales approximately indicates what retailers can expect in the following months as well. If consumers are generous and open their pocketbooks, it can be a sign that economic conditions are improving, however slightly.
JB Hi-Fi Limited (ASX: JBH), the electronics and white goods retailer, could be looking at a good holiday season for several reasons:
— New tablet PCs and popular game consoles
There are new Apple products like iPhones and iPads on the market, as well as the new Microsoft Surface 3 tablet PC which could boost sales.
The company will also have more inventory of the newest game consoles of Xbox and PlayStation in time to satisfy customer demand during the year's biggest shopping period.
— Exclusive game codes retailing
JB Hi-Fi will also have a bonus this holiday season, Xbox downloadable game codes. The company secured an exclusive offer with Microsoft to sell game codes to download and activate certain popular games. That competitive edge could also get customers to visit the store and buy other items.
— New HOME stores
In FY 2014, despite the sombre retail environment, JB Hi-Fi was able to pull off a 10.3% gain in net profit, which caught the market by surprise. What helped was their new JB Hi-Fi HOME format stores that also sell appliances and white goods. The housing market is still growing, so this will complement expected better Christmas sales of electronics. Some of its stores saw high same-store sales growth after converting over to the HOME format in FY 2014. Could JB Hi-Fi surprise the market again?
JB Hi-Fi's stock pays a huge 5.5% fully franked yield, which is higher than some of the big four banks. It is trading at 12 times earnings, which is on the low side of its past PE range, making it look attractively priced. While you are thinking of holiday gift ideas, one of them might be shares in JB Hi-Fi for your portfolio.
