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Is the JB Hi-Fi (ASX:JBH) share price a buy after reporting?

JB Hi-Fi share price
Credit: Peter Heath

Is the JB Hi-Fi Limited (ASX: JBH) share price a buy after releasing its FY21 half-year result?

JB Hi-Fi shares rose 3% yesterday in reaction to the report.

One broker has already had their say on what they thought of the electronics retailer’s result.

Highlights from the JB Hi-Fi report

For the six months ending 31 December 2020, the retailer reported that its total sales went up 23.7% to $4.9 billion. A growing component of that is the online sales, which rose 161.7% to $678.8 million – this made up 13.7% of the overall sales.

Looking at each individual segment, The Good Guys grew revenue by 9.1% to $1.45 billion and online sales went up 86.1% to $148 million. Management said that there was continued elevated customer demand for home appliance and consumer electronics products. The Good Guys’ gross profit margin improved 167 basis points to 22.4% and earnings before interest and tax (EBIT) grew 142.1% to $126.6 million, with the EBIT margin rising 417 basis points to 8.7%.

Next we’ll look at the key JB Hi-Fi Australia division, where total sales grew by 23.3% to $3.36 billion and online sales went up 201.9% to $515.6 million. There was also strong demand here for consumer electronics and home appliance products. The gross profit margin declined by 9 basis points to 22% as a result of the sales mix. EBIT rose 57.5% to $329.8 million and the EBIT margin improved 214 basis points to 9.8%.

The final division, JB Hi-Fi New Zealand, saw total sales growth of 9.1% to NZ$144.9 million. Online sales grew 69.2% to NZ$16.3 million. EBIT was NZ$6.9 million, whilst underlying EBIT rose 173% to NZ$4.1 million.

JB Hi-Fi’s total EBIT was up 76% to $462.8 million. This helped net profit after tax (NPAT) surge higher by 86.2% to $317.7 million. Earnings per share (EPS) went up by 86.2% to 276.5 cents.

As a result of the profit growth, the JB Hi-Fi board decided to declare an interim dividend of $1.80 per share, which was an increase of 81.8% from the prior corresponding period.

Commenting on capital management, the company said the board will continue to regularly review the group’s capital structure with a focus on maximising returns to shareholders and maintaining balance strength and flexibility.

Trading update

Whilst JB Hi-Fi said it wasn’t appropriate to give FY21 sales and earnings guidance due to the COVID-19 uncertainty, it was able to give a trading update for January 2021.

Total sales growth for JB Hi-Fi Australia was 17.3%, in New Zealand sales growth was 21.7% and at The Good Guys total sales went up 14.1%.

Is the JB Hi-Fi share price a buy?

Broker Citi has been one of the first to reveal its thoughts about the result.

The stronger gross profit margin and continuing strength of earnings were two highlights for the broker

Citi also pointed out that the EBIT growth of the Australian growth was good, it didn’t show the same operating leverage that The Good Guys did thanks to the stronger gross profit margin.

The broker is not expecting that JB Hi-Fi will be able to beat the second half performance of FY20 because of how strong consumer demand was during that period. Citi is expecting sales to be down slightly and profit to be down around 20%.

Citi thinks that the current dividend payout ratio of 65% and good levels of capital could mean an acquisition or capital return is on the cards for shareholders.

The JB Hi-Fi share price target remains $53, suggesting little capital upside over the next 12 months. JB Hi-Fi currently has a projected FY21 grossed-up dividend yield of 7.4% according to Citi.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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