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Here’s why the JB Hi-Fi Limited share price is soaring

Credit: Peter Heath

Shares of specialty electronics retailer JB Hi-Fi Limited (ASX: JBH) have continued their impressive run today, rising another 2.8% compared to the S&P/ASX 200’s (Index: ^AXJO) (ASX: XJO) 0.7% decline.

They’ve risen a total of 8.2% in 2016 and 19.5% since mid-December.

So What: The collapse of Dick Smith Holdings Ltd (ASX: DSH) has dominated news headlines this week after the retailer entered voluntary administration. Following a poor Christmas period, the retailer failed to get the necessary financial support from its banking syndicate with insolvency specialists now taking control of the company.

As its closest competitors, it is expected that JB Hi-Fi and Harvey Norman Holdings Limited (ASX: HVN) will benefit from Dick Smith’s collapse. As quoted by The Sydney Morning Herald, analysts from Morgan Stanley believe that both companies could pick up around $200 million in annual sales each as a result.

Furthermore, it could also benefit their bargaining position with suppliers, potentially acting to improve their margins and overall earnings.

Now What: Although investing in the retail sector is not without its risks, JB Hi-Fi has continually highlighted its ability to adapt to changing environments. One of the most recent examples of this was its push into the white goods market through its HOME format stores, while it is also beginning to sell these products in its traditional stores as well.

Reasonable growth is forecast for the next few years, based on estimates provided by Morningstar, while that should also pave the way for further dividend growth. As it stands, the shares are trading on a fully-franked dividend yield of 4.3% and could be worth a closer look for investors.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. You can follow Ryan on Twitter @ASXvalueinvest.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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