Aussie electronics store JB H-Fi Ltd (ASX: JBH) has been one of the best-performing ASX retail stocks to own this year. While competitors like Harvey Norman Holdings Limited (ASX: HVN) and Kogan.com Ltd (ASX: KGN) have struggled in 2024, JB Hi-Fi shares have soared over 40% higher year to date.
Earlier this month they even set a new record high price of $83.30 (as at the timing of writing, JBH shares have fallen back down to a little under $79).
Those returns are especially impressive considering that higher living costs have forced households to cut back on discretionary spending.
You'd think a retailer that stocks mostly big-screen TVs and high-end home audio equipment would struggle in this sort of market, but JB Hi-Fi seems to only be going from strength to strength.
So, why have investors been so desperate to snap up shares in JB Hi-Fi this year? And, if you're a JBH shareholder yourself, is now the time to think about taking some of your profits off the table?
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Why the surge in the JB Hi-Fi share price?
On the face of it, JB Hi-Fi's FY24 financial results weren't that great. Revenues were basically flat year on year at $9.6 billion, but higher costs (particularly from sales and marketing) put increased pressure on the company's bottom line, ultimately causing net profit to plunge 16.4% to $438.8 million.
However, investors focused on the green shoots. Along with its annual results, JB Hi-Fi provided a trading update for July 2024, in which it reported that all operating segments were performing strongly. Growth in Australia was particularly noteworthy – sales were up 5.6% in July versus just 1% for the whole of FY24.
At the time, JB Hi-Fi CEO Terry Smart commented that it was "pleasing to see sales momentum in Australia continue into July."
Perhaps it was a sign that the economy – and JB Hi-Fi's sales volumes – were already beginning to rebound.
Plus, there was the announcement that JB Hi-Fi would be paying a juicy special dividend of 80 cents per share. This more than offset the lower final dividend paid out of the company's annual profits. Including the special and interim dividends, distributions to shareholders were 341 cents per share in FY24, up from 312 cents per share in FY23.
It was a narrow tightrope to walk, but JB Hi-Fi management seemed to have done enough to keep both growth-oriented and income-seeking investors happy.
Those looking for growth could point to the Group's strong July performance as evidence that FY25 could be another banner year for the company. At the same time, income investors were placated by that bumper special dividend.
Is it time to sell?
JB Hi-Fi seems to have defied the odds this year. High interest rates and high inflation should usually sound the death knell for consumer discretionary stocks. But somehow, despite sluggish sales and a hefty drop in overall profits, JB Hi-Fi has managed to come out on top.
Although that shouldn't really come as much of a surprise – JB Hi-Fi has been coming out on top for years. If you're a long-term shareholder, it's very likely you're up a lot more than just the 40% that the stock has risen so far in 2024.
A little over five years ago, JB Hi-Fi shares were trading at around $30 a pop, and now they're pushing $80. That's a gain of more than 160% – despite a pandemic, runaway inflation, rapid interest rate hikes, and arguably the worst geopolitical tensions in decades.
If anything, this recent performance has shown just how resilient JB Hi-Fi really is. With a total market cap of a bit over $8.6 billion, it isn't far off being one of the ASX's top 50 largest companies and a genuine blue-chip. It has a mature business model and a stable dividend, propped up by a strong balance sheet.
It's understandable if you want to take some profit off the table – but the combination of growth and income offered by JB Hi-Fi still makes it one of the best ASX retail stocks to hold for many years to come, in my opinion.
