JB Hi-Fi (ASX: JBH) share price higher after beating expectations in FY 2021

This retail giant had a strong year….

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The JB Hi-Fi Limited (ASX: JBH) share price is defying the market weakness and charging higher on Tuesday.

In late morning trade, the retail giant’s shares are up almost 3% to $49.02.

Why is the JB Hi-Fi share price charging higher?

Investors have been bidding the JB Hi-Fi share price higher this morning following the release of a sales and earnings update for FY 2021.

According to the release, JB Hi-Fi experienced increased demand for consumer electronics and home appliance products in FY 2021. This underpinned a 12.6% increase in total sales to $8.9 billion for the 12 months.

A key driver of this growth was its online business. JB Hi-Fi reported a 78.1% year-on-year increase in online sales to $1.1 billion. This means that online sales now account for 11.9% of total sales.

In respect to earnings, JB Hi-Fi revealed that improvements in gross margins and cost control led to significant operating leverage.

As a result, the company expects to report earnings before interest and taxes (EBIT) of $743.2 million and net profit after tax of $506.1 million. This represents an increase of 53.8% and 67.4%, respectively, year on year.

How does this compare to expectations?

According to a note out of Goldman Sachs, JB Hi-Fi has outperformed expectations in FY 2021. This goes some way to explaining the solid gains being made by the JB Hi-Fi share price today.

It commented: “JBH pre-announced FY21 results reporting sales at A$8916.1mn, +0.3% vs. GSe and +0.1% vs. Visible Alpha consensus and EBIT at A$743.2mn, +2% vs. GSe and +4.7% vs. Visible Alpha Consensus.”

“FY21 results was broadly in line with our expectations with strong margins driven by ongoing sales momentum. While we continue to expect this to normalize at some stage, the ongoing lockdowns could potentially prolong the strong momentum longer than our current expectations,” the broker added.

Goldman Sachs currently has a neutral rating and $48.00 price target on the JB Hi-Fi share price.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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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