Retail remains a challenging sector with Australian consumer sentiment falling in February 2026, largely driven by interest rate rises. With another rate rise potentially looming, how are these retailers faring?
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JB Hi-Fi Limited (ASX: JBH)
JB Hi-Fi delivered some solid 1H26 results, including:
- Sales revenue up 7.3% to $6.1 billion
- Net profit after tax up 7.1% to $305.8 million
- Earnings per share up 7.1%
While it experienced a slowdown in sales momentum in January, JB Hi Fi continues to thrive overall. And for me, its relative success in a difficult consumer spending climate comes down to the power of its brand. Its core value proposition has never wavered.
Customers know what to expect from JB Hi-Fi, and it continually delivers, with discounted prices, easy price matching and an interactive in-store experience. Its casual staff culture appeals to younger generations who typically spend more on technology than their older counterparts. Gen Z and Millennials drop a combined $9.2 billion a year on smart home tech alone, according to 2025 Pure Profile research conducted for Samsung.
And while this demographic is also much more likely to buy online, I believe JB Hi-Fi's in-store experience and the broader societal trend towards instant gratification position it well in this landscape.
JB Hi-Fi has indicated that it expects some further softening in consumer spending in the next quarter. But I believe the retailer is well-positioned to weather any potential challenges. Its balance sheet should provide enough cover, with low debt and cash reserves of $489.5 million as of 1H26.
From a share price perspective, it remains fair value, with a small upside for investors, in my opinion. It has dropped around 13% in the last year, perhaps driven by broader market weakness and investor concern about a consumer spending crunch.
Harvey Norman Holdings Limited (ASX: HVN)
Harvey Norman also delivered robust results for the half, including:
- Sales revenue up 6.9% to $5.16 billion
- Net profit after tax up 15.2% to $321.9 million
- Earnings per share up 20.8%
Regardless, its share price has fallen around 20% over the last month, most likely due to concerns about a consumer spending squeeze.
Harvey Norman is a decent business as it stands today. With a solid supplier network and the backing of its strong property portfolio, it's in a good position to stare down the immediate challenges of any contraction in consumer spending.
However, the value proposition for this retailer changes for me based on the time horizon.
According to Roy Morgan Research, almost 60% of Harvey Norman's customers were aged over 50 in 2019, highlighting its popularity amongst Baby Boomers and older Gen Xers. Given that its marketing appears to target the same audience in 2026, I think it's reasonable to assume that this hasn't materially changed.
In a spending crunch, we tend to see older generations spending more than Millennials, who are in the thick of one of life's most expensive stages, from school fees to mortgages.
So, in the short term, an older customer base combined with a strong balance sheet will likely be an advantage for Harvey Norman.
Over the longer term, however, I don't love its brand positioning. There is a risk that it may compete solely on price to attract Millennial and Gen Z consumers. Harvey Norman will need to deliver a consistent, high-quality in-store experience to compete with lean online players and with competitors like JB Hi-Fi, which has already successfully attracted younger shoppers.
Would I buy it right now? Probably. I think there is some upside at current prices, and its recent results and balance sheet look good. Long-term, I think it may face challenges if it continues with its current brand positioning.
The bottom line
Both are reasonably good retail buys right now. In the short term, I think Harvey Norman has a slight edge. Its results are strong, its higher dividend yield is appealing, and I think there may be a little more upside at current prices. However, looking longer term, I think JB Hi-Fi will prove the stronger business, gaining real momentum from the investment it has made in its brand.
