The two consumer electronics retailers Dick Smith Holdings Ltd (ASX: DSH) and JB Hi-Fi Limited (ASX: JBH) are engaged in a fierce competition, not just with each other, but online only as well as other bricks-and-mortar retailers.
Here we take a look at both retailers side by side, with financial data taken from their respective 2014 reports.
| Dick Smith | JB Hi-Fi | |
| Current share price | 2.12 | 15.02 |
| Market cap ($m) | 479 | 1,450 |
| Revenues ($m) | 1,227.6 | 3,483.8 |
| Net profit ($m) | 42.1 | 128.4 |
| Earnings per share (cents) | 17.8 | 128.4 |
| Cost of doing business (CODB) | 19% | 15.2% |
| EBIT margin | 5% | 5.5% |
| Net debt / (cash) ($m) | -29.90 | 136.60 |
| Net debt/equity ratio | N/A | 46.4% |
| Number of stores | 377 | 182 |
| Target number of stores | 450 | 214 |
| Sales per store ($m) | 3.3 | 19.1 |
| Same store sales growth | 0.8% | 2% |
| Online sales as % of total | 4% | 2.2% |
| P/E ratio | 11.4x | 11.3x |
| Price / Sales ratio | 0.39 | 0.42 |
| Dividend yield (fully franked) | 3.80% | 5.6% |
Source: Company reports
Of course there are several differences between the two retailers.
JB Hi-Fi has expanded into whitegoods, and a number of its stores are large scale warehouse format. Dick Smith on the other hand, has 29 smaller format stores in David Jones department stores, and has another 61 stores in New Zealand. JB Hi-Fi has just 13 stores across the ditch.
What is interesting is that they appear to be very similarly priced, with similar P/E and price/sales ratios. And although JB Hi-Fi is paying a dividend yield of 5.6%, Dick Smith only paid one dividend last financial year.
JB Hi-Fi has slightly better margins, although much of that comes from its lower cost of doing business (CODB) at 15.2% compared to Dick Smith's 19%. At its AGM today, Dick Smith says it is aiming to reduce its CODB to between 17.5% and 18.5% by 2017.
Dick Smith is also expanding its private label range of products, with the goal of private label sales being more than 15% of total sales. That should also help Dick Smith increase its margins, as private label products are generally sold at higher margin price points.
It's hard to pick between the two given their similar valuation ratios, but I'd probably opt for JB Hi-Fi, given their lower cost of doing business, potential for Apple's iPhone 6 to boost sales, stronger same store sales growth, and diversification into whitegoods.
