JB Hi-Fi growth continues

Competitors may bear the brunt of that growth

a woman

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Just over a year ago, in June 2012, JB Hi-Fi (ASX: JBH) shares were languishing at around $8.00. Since that time, shares in the consumer electronics retailer have skyrocketed more than 150%, despite ongoing weak retail conditions.

Today, JB Hi-Fi says it is on track to grow sales by up to 8% in the 2014 financial year over the previous year, buoyed by new store openings and the new HOME appliance concept stores. Same store sales are also growing, rising 2.9% in the September quarter, suggesting the company could have a very merry Christmas.

Expansion into the $4.6 billion home appliances market has been a success, with 8 stores converted by the end of June 2013, and the company says there is potential for around 50 HOME stores over the next three years. A further 10 stores will be converted to the HOME concept this financial year.

Online sales are surging as well, but off a low base. In 2013, online sales climbed 30%, but still represent around 2% of total sales. That appears to be a major growth opportunity for JB. CEO Terry Smart says the company sees significant growth opportunities ahead, driven by new product releases, new stores, expansion of the home appliance categories and its online and commercial businesses.

Never one to rest on its laurels, JB Hi-Fi has also been focused on lowering its cost of doing business (CODB). At 15.1%, it's lower than the company's major listed competitors, including Harvey Norman (ASX: HVN), as well as many of its international peers, according to JB. Store wages, a large cost for JB Hi-Fi have remained flat as a percentage of sales, despite award increases.

The news is likely to prove a fillip for another consumer electronics retailer and IPO-hopeful Dick Smith. The current owners suggest that the company has turned around since being offloaded for just $20 million last year by Woolworths (ASX: WOW). A new smaller format store branded 'Move' and a deal with David Jones (ASX: DJS) are also being promoted as a point of difference for Dick Smith.

Foolish takeaway

Here at the Motley Fool, we remain cautious about Dick Smith and would caution investors to consider why private equity is selling the company now, when it has so much 'hyped' potential. JB Hi-Fi's growth should not be automatically 'assumed' for the consumer electronics retailer.

Motley Fool writer/analyst Mike King owns shares in Woolworths.

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