JB Hi-Fi Limited (ASX: JBH), Australia's second largest retailer by market cap is a market favourite, but the arrival of Amazon in Australia has caused a price war, putting pressure on margins.
Net margins are being hurt, but JB Hi-Fi's Chief Executive Officer says it is a result of JB Hi-Fi selling more computers and mobile phones, which have lower margins compared to high-margin DVDs, CDs and software (as reported in the Sydney Morning Herald). JB Hi-Fi has responded to Amazon by beefing up its online site leading to higher online sales.
After comparing prices for Apple's MacBook Air on both JB Hi-Fi and Amazon's website, Amazon is cheaper by $50 before delivery. But, there are only four Apple laptops listed on Amazon compared to 22 Apple laptops on JB Hi-Fi's site. Amazon does not offer the variety of brands and models yet for some categories, but if consumers can find what they are looking for at a lower price, then the it is an obvious choice.
In the Australian Financial Review a Platypus Fund Manager who runs a concentrated portfolio of between 20 to 40 "growth-style" stocks, said that he believes that JB Hi-Fi is one retailer than can meet the Amazon challenge.
On 31 January 2018 JB Hi-Fi traded at a high of $29.20 but since is down to $25.20, trading on a forward PE ratio of 12.5 based on (JB Were) forecast EPS growth of 23.8%. The trailing dividend yield per annum (pa) is 5% fully franked. Not all bad news with a solid yield and strong earnings growth expected.
JB Hi-Fi's' insiders have been active net buyers over the last three months, with individual insiders owning around 4.9% of total shares outstanding.
Retailer, Harvey Norman Holdings Limited (ASX: HVN) has seen its share price fall 15.4% in one year. It is trading on a forward PE ratio of 10 with forecast earnings growth of 26.9% according to JB Were.
The company is paying a 7% pa trailing dividend yield (fully franked). Recently, JPMorgan upgraded Harvey Norman from 'underweight' to 'neutral', which saw the shares soar by 7% to $3.61, but now back to $3.5o.
