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Results in: Are JB Hi-Fi Limited (ASX:JBH) shares in the buy zone?

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).

Alternatively, these buy-rated shares could be great options for investors.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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