In morning trade the JB Hi-Fi Limited (ASX: JBH) share price has dropped 1.5% lower to $23.25 following the release of its first quarter update.
Here is how JB H-Fi performed in the first quarter compared to the prior corresponding period (pcp):
- Total sales growth for JB HI-FI Australia was 5.3% (pcp: 8.1%), with comparable sales growth of 3.4% (pcp: 4.9%)
- Total sales growth for JB HI-FI New Zealand was 4% (pcp: -6.3%), with comparable sales growth of 9.8% (pcp: -6.2%)
- Total sales growth for The Good Guys was 2.3% (pcp: 4.1%), with comparable sales growth of 1.0% (pcp: 3.4%).
In light of this, management has held firm with its sales guidance for FY 2019. It expects total sales of $7.1 billion this year, comprising $4.75 billion from JB Hi-Fi Australia, NZ$220 million from JB Hi-Fi New Zealand, and $2.15 billion from The Good Guys.
What now?
I was pleasantly surprised with JB Hi-Fi's update today and suspect that its shares would have pushed higher had the market not been in meltdown mode.
While the company's sales growth has certainly slowed since this time last year, sales are still growing at a solid rate despite weakness in the housing market.
Furthermore, in his annual general meeting speech, CEO Richard Murray sounded quite positive on the company's prospects and there were no mentions of tough trading conditions unlike the recent updates by Reject Shop Ltd (ASX: TRS) and Super Retail Group Ltd (ASX: SUL).
He ended by saying: "We believe we have two unique and relevant brands, particularly in the eyes of our customers. With a customer focused, flexible and dual branded business model built on a diverse product offering, the best brands at low prices, exceptional customer service and a high quality multichannel offer, we are confident we will maintain our market leading competitive position. I look forward to another exciting and successful year in FY19."
Should you invest?
I've been impressed with the way JB Hi-Fi has started the year in respect to sales. However, one important thing missing from this update is its margins.
Strong sales growth is great, but if that has come at the expense of margin, then it could all be for nothing.
In light of this, I intend to continue to avoid the JB Hi-Fi and rival Harvey Norman Holdings Limited (ASX: HVN) until I have seen their financials for the first half.
