JB Hi-Fi Limited (ASX: JBH) released its half-year FY2018 results this morning, announcing total sales growth of 41.0% to $3.7 billion and group earnings before interest and tax (EBIT) up 24.9% on the previous corresponding period to $225.8 million.
These growth figures have been affected by the company's major acquisition of The Good Guys in November 2016, however JB Hi-Fi's Australian segment continues to perform strongly despite the recent arrival of Amazon.
Importantly, comparable sales in Australia rose 7.8% for the period and the online business continues to grow, albeit as a small percentage of total sales. EBIT grew 10.9% for the segment while EBIT margin remained flat as the company continues to focus on productivity and expenditure minimisation.
Performance of JB's New Zealand business was less pleasing. The segment only contributed 3.4% of total sales for the period. While comparable sales rose 8.7%, total sales, earnings and gross margin deteriorated on the previous corresponding period.
Not a great result for New Zealand, however, management will be putting most of its energies into the Australian business and integration of The Good Guys.
Performance reporting of The Good Guys was affected by the timing of the acquisition in late 2016, however comparative sales for the six months from July to December shows total sales increased just 2.4% and comparable sales 1.8%.
Management has controlled The Good Guys for 12 months now, and although it's still early days, the acquisition's performance has underwhelmed compared to JB's Australian segment.
In today's announcements, management also provided a sales update for January and full-year FY2018 guidance. Both total and comparable sales for the Australian segment fell compared to January 2017, and sales from The Good Guys were particularly disappointing compared to the same month last year.
Total sales growth for The Good Guys was 5.0% and comparable sales growth was 3.5% in January 2017, and the same figures fell to -3.5% and -4.7% respectively in January 2018.
For FY2018, management expects total sales to be around $6.85 billion and group net profit after tax (NPAT) in the range of $235 million to $240 million, which would be an increase of between 13.1% to 15.5% on underlying NPAT in the previous corresponding period.
Foolish takeaway
On these results, JB's Australian segment is continuing to perform strongly, though the same can't be said of The Good Guys and the New Zealand business. The Good Guys in particular is a concern, as the division contributed 30% to total group sales for the period.
The Good Guys' half-year sales numbers weren't inspiring, and the latest January figures suggest conditions are only becoming tougher.
The market is already cautious on retail companies due to the current economic climate in Australia, and any sign of weakness will likely result in selling pressure, as we've seen this morning.
