Why is the JB Hi-Fi share price being slashed 8% today?

JB Hi-Fi shares are down heavily. What’s going on?

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Key points

  • The JB Hi-Fi share price has been hit hard in morning trading 
  • Overnight, Target reported much lower earnings as inflation bites in the US 
  • However, JB Hi-Fi’s recent trading update said that it was still seeing strong sales 

The JB Hi-Fi Limited (ASX: JBH) share price is currently down more than 8%. It’s currently one of the worst performers in the S&P/ASX 200 Index (ASX: XJO).

ASX growth shares, particularly technology stocks, have been particularly hurt by the volatility and sell-off during 2022. But today it’s retail shares in the spotlight.

There is a lot of investor attention on both inflation and what central banks might do to get it under control by raising interest rates.

So why are ASX retail shares, including the JB Hi-Fi share price, hurting so much today?

Inflation could be the culprit

Overnight, there was a painful sell-off in the US share market.

The Nasdaq-100 Index (NASDAQ: NDX) plunged 5%. One of the heaviest falls was the Amazon.com Inc (NASDAQ: AMZN) share price which dropped by around 7%.

But, it has been other major retailers that may have sparked investor uncertainty. Walmart (NYSE: WMT) shares are down 17% in the last two trading sessions and the Target (NYSE: TGT) share price dropped around 25% overnight.

Both retailers have told the market about how inflation has been impacting profitability.

Target reported that customers didn’t spend as much on discretionary items, leading to more discounting. Elevated supply chain costs and higher wages also weighed on earnings, leading to the company’s adjusted earnings per share (EPS) plunging over 40% and underperforming expectations in the three months to 30 April 2022.

JB Hi-Fi is not the same business as Amazon, Target or Walmart. However, there may be concerns that the same sort of inflation problems and lower consumer demand could impact a retail ASX share like JB Hi-Fi.

How is the company performing?

The latest sales update we’ve heard from the company was for the three months to 31 March 2022.

It said that for the three months, total JB Hi-Fi Australia sales went up 11.9%, JB Hi-Fi New Zealand sales rose 4.8% in New Zealand dollar terms and The Good Guys sales rose 5.5%.

Management said that in the third quarter, it saw “heightened customer demand and strong sales growth.” That update, on 4 May 2022, also said that “sales momentum had continued” into the fourth quarter of FY22.

However, JB Hi-Fi did mention ongoing disruption to stock availability and operations arising from COVID-19 impacts, as well as other local and global uncertainties.

What next?

The company didn’t think it was appropriate to provide FY22 sales and earnings guidance.

Unless management think it’s important to give another update over the next couple of months, the next we’ll hear from the business is in reporting season in August 2022 when the company releases its FY22 full year result.

At that time, the company is likely to give another trading update and perhaps provide commentary on the operating conditions.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon. The Motley Fool Australia has recommended Amazon. 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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