In afternoon trade the JB Hi-Fi Limited (ASX: JBH) share price is flat at $23.53 after recovering from a 3.5% decline in early morning trade following the release of its annual general meeting presentation.
What happened?
At its AGM this morning the electronics retailer provided the market with an update on its performance for the first 16 weeks of FY 2018.
According to the update, the retailer has had a solid start to the year and sales are in line with expectations.
Total sales for the JB Hi-Fi business as of October 22 had grown 6.2% on the prior corresponding period and comparable store sales are up 3.2%.
Considering the weak retail environment and its strong sales growth in the prior corresponding period (sales up 14.3% and comparable sales up 10%), I was reasonably impressed with JB Hi-Fi's performance during the period.
Year-to-date the Good Guys business has posted a 3.1% lift in sales, with comparable sales growth of 2.4%.
In light of this, management has reaffirmed its full-year sales guidance of circa $6.8 billion, with the JB Hi-Fi business expected to generate sales of $4.65 billion and the remaining $2.15 billion of these sales expected to come from The Good Guys business.
This will be a 21.4% increase on total sales in FY 2017 and is partly due to this being the first full year contribution from The Good Guys business.
If you take The Good Guys out of the equation, this would mean sales growth of approximately 7% year-on-year.
Should you invest?
While I think that JB Hi-Fi's shares are relatively cheap, even based on the forecast growth of the JB Hi-Fi business this year, I'm still not a buyer of its shares due to the impending arrival of Amazon in Australia.
Having seen the damage that Amazon did to similar businesses in the United States and the United Kingdom, I am concerned that JB Hi-Fi and rival Harvey Norman Holdings Limited (ASX: HVN) could see margins and profits slide considerably in the years following Amazon's launch.
Because of this, I plan to stay clear of the retailer despite how cheap it appears.
