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JB Hi-Fi shares tumble lower on fears of worst Christmas for retailers in years

It has been another disappointing day of trade for the JB Hi-Fi Limited (ASX: JBH) share price.

At the time of writing the retailer’s shares are down 2.5% to $20.90, putting them within touching distance of another 52-week low.

Why is the JB Hi-Fi share price sinking lower again?

Investors appear to be hitting the sell button in a panic following the release of a broker note out of Deutsche Bank this morning.

Following the surprisingly bad trading update from Kathmandu Holdings Ltd (ASX: KMD) last week, the market has been concerned that the retail sector may have had a weaker than expected Christmas period.

Unfortunately, based on Deutsche Bank’s research, it looks as though this was the case.

According to a note out of the investment bank, it has spoken with its retail contacts and the general consensus is that this was the worst Christmas for retailers in many years.

While foot traffic and sales were softer than hoped, the broker notes that margins were the real issue for Australian retailers.

This appears to have investors worried that JB Hi-Fi could have struggled during the period and could fall short of expectations when it releases its first half results next month.

Though it is worth noting that the broker believes that apparel and accessory-focused specialty retailers are the ones that may have been hit the hardest, whereas JB Hi-Fi may have actually performed better than most in the challenging trading conditions.

But not well enough for the broker to upgrade its shares. Deutsche has retained its neutral rating on JB Hi-Fi’s shares.

Should you buy JB Hi-Fi shares?

Although both JB Hi-Fi and rival Harvey Norman Holdings Limited (ASX: HVN) trade on low multiples, I would suggest investors resist the temptation to buy shares and wait for their half year results before making a decision.

After all, as the Christmas period is a major contributor to the sales and earnings of retail companies, any underperformance could have a dramatic impact on their full year results and ultimately the share prices.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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