The JB Hi-Fi Limited (ASX: JBH) share price had a strong start to the week before giving back its early gains.
At the time of writing the retailer's shares are up 2% to $23.97 following the release of its full-year results. At one stage they were up as much as 5.5% to $24.80.
Here's a quick summary of how it performed in FY 2018 compared to the prior corresponding period:
- Total sales rose 21.8% to $6.9 billion.
- Earnings before interest and tax (EBIT) increased 14.5% to $350.6 million.
- Net profit after tax climbed 12.3% on an underlying basis to $233.2 million.
- Statutory net profit after tax was up 35.3%.
- Earnings per share increased 9.2% to 203.1 cents.
- Total dividend increased 11.9% to 132 cents per share.
While this was arguably a solid result, it was far weaker than the first-half of FY 2018 when sales were up 41% and EBIT was up 24.9%.
The slowdown was due largely to the underperformance of The Good Guys business due to heightened competition. Its sales for the 12 months to June 30 were $2.10 billion, up just 1.5% on FY 2017 and 0.9% on a comparable store basis.
The JB Hi-Fi Australia segment also slowed a touch in the second-half. Total sales grew by 9.4% to $4.54 billion and comparable sales were up 6.2% in FY 2018. As a comparison, in the first-half sales were up 10.8% and comparable sales were up 7.8%.
It was a similar story for its struggling JB Hi-Fi New Zealand segment which posted total sales of NZ$231.5 million, down 1.1% on FY 2017 and 2.4% on a comparable store basis.
What about FY 2019?
While improvements have been seen in the Good Guys business, the performance of its core JB Hi-Fi business continues to soften.
According to management, in July JB Hi-Fi Australia's sales were up 2.9% and comparable sales growth was 0.3%. JB Hi-Fi New Zealand's sales were down 2.1% despite a 3.4% rise in comparable store sales. Finally, The Good Guys business has seen sales rise 2.7% on the prior corresponding period and 1.4% on a comparable stores basis.
As a result of this, management's full-year guidance is for total sales of $7.1 billion, up 2.9% year-on-year. This guidance includes the planned opening of five JB Hi-Fi stores in Australia, one closure in New Zealand, and two new The Good Guys stores.
No profit guidance was provided, but given the heightened competition that it faces, I wouldn't be surprised to see margins continue to be pressured, leading to earnings going backwards.
Because of this, I would suggest investors stay away from JB Hi-Fi and rival Harvey Norman Holdings Limited (ASX: HVN). Instead, I would consider fast-growing e-commerce company Kogan.com Ltd (ASX: KGN).
