JB Hi-Fi Limited (ASX: JBH) has reported its half year report to 31 December 2018, is it a buy?

JB Hi-Fi is one of Australia’s largest device and home appliance retailers with its network of The Good Guys and JB Hi-Fi stores. JB Hi-Fi was established in 1974 by Mr. John Barbuto (JB), trading from a single store in East Keilor, Victoria.

JB Hi-Fi’s Half Year Report

The electronics retail reported that total sales grew by 4.2% to $3.8 billion. The key JB Hi-Fi Australia segment grew sales by 4.7% to $2.59 billion, with comparable sales up by 3%. Impressively, online sales increased by 21%.

JB Hi-Fi New Zealand sales increased by 5.8% to NZ$131.8 million with comparable sales of 12.6%. The Good Guys total sales increased by 2.8% to $1.13 billion with comparable sales growing by 1.5%.

Group EBIT increased by 4.8% to $236.6 million thanks to an improvement in profit margins at JB Hi-Fi Australia (click here to learn what EBIT means).

Group net profit after tax (NPAT) grew by 5.5% to $160.1 million. This resulted in earnings per share (EPS) increasing by 5.4% to 139.4 cents.

JB Hi-Fi Dividend

The company has decided to pay an interim dividend of 91 cents per share, which is a 5.8% increased compared to last year. This represents a payout ratio of 65% of net profit.

Market Expectations

According to Bell Potter, the market consensus expectations were for a net profit of $154 million, so compared to JB Hi-Fi’s result of $160.1 the company appears to have materially beaten the expectations.

JB Hi-Fi Management Comments

The CEO of JB Hi-Fi, Richard Murray, said: ““In a competitive environment we remained focused on sales and market share whilst continuing to evolve the business.”

JB Hi-Fi Trading Update And Outlook

In January 2019 the company said that JB Hi-Fi Australia had achieved sales growth of 3% with comparable sales growth of 1.5%.

For the rest of FY19, the company expects total sales to be $7.1 billion and group profit to be in the range of $237 million to $245 million, which would represent growth of 1.6% to 5.1%.

Is JB Hi-Fi A Buy?

I continue to be impressed by JB Hi Fi’s ability to keep growing sales and profit despite a very tough retail environment with falling house prices and more competition, particularly from online players like Amazon.

With a fully franked dividend yield of 6%, JB Hi-Fi is potentially a contrarian investment idea. But with profit growth clearly slowing, it’s not the type of investment I’m drawn to.

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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).