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JB Hi-Fi Limited soars 10.7%: Is it still a buy?

Shares of discount electronics retailer JB Hi-Fi Limited (ASX: JBH) have skyrocketed after the company provided a rather upbeat outlook for the key Christmas period. The shares shot up 10.7% early in the session to be trading at $16.35, representing an impressive gain of $1.58 per share.

In comparison, the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) rose just 0.3%.

So What: JB Hi-Fi, like various other retailers, experienced a somewhat lacklustre period between May and August. While the Federal Government’s horror budget was one of the primary factors affecting activity, JB Hi-Fi was further impacted by a market-wide decline in tablet sales.

Although same-store sales remain 2.1% lower for the year, sales are up 0.5% and the company has returned to comparable sales growth in September and October. Notably, this puts the retailer in an excellent position to benefit from the key Christmas trading period.

Enhancing this prospect has been the launch of the new iPhone ranges and Microsoft Surface 3, as well as improved stock availability of the popular PS4 and Xbox One gaming consoles, which the company expects will also boost sales growth.

Now What: The company still expects to meet its previous guidance of $3.6 billion in total sales this financial year, which may have taken investors by surprise considering the poor start to the year experienced by Australia’s retail sector.

Investors were likely also pleased with progress in the rollout of the company’s HOME format stores. JB Hi-Fi advised that the HOME expansion is one year ahead of the company’s original expectations with 22 stores opened as at 30 June 2014, and 53 expected to be open by the end of FY15. The HOME format represents a huge growth opportunity for the company and investors alike, with JB Hi-Fi’s shares trading at a very attractive price for long-term focused investors.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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