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JB Hi-Fi (ASX:JBH) share price in focus on 20% profit drop in HY24 result

The JB Hi-Fi Limited (ASX: JBH) share price is under the spotlight after the company released a challenging HY24 result.

FY24 half-year result

Here are some of the highlights from the six months to 31 December 2023:

  • Total sales fell 2.2% to $5.16 billion
  • EBIT (EBIT explained) dropped 19.3% to $386.7 million
  • Net profit after tax (NPAT) declined 19.9% to $264.3 million
  • Profit / earnings per share (EPS) fell 19.9% to $2.418
  • Dividend per share reduced 19.8% to $1.58

Looking at the divisional breakdown of each segment, JB Hi-Fi Australia sales rose 0.7% to $3.6 billion but EBIT dropped 13.7% to $294.6 million.

JB Hi-Fi New Zealand sales increased 5.1% to NZ$168.7 million, and EBIT dropped from NZ$5.4 million in HY23 to a loss of NZ$0.4 million.

The Good Guys sales sank 9.9% to NZ$1.39 billion, while EBIT dropped 30.5% to $92.5 million.

The company said that its gross profit reduced because of increased levels of on-floor discounting. The cost of doing business (CODB) increased, though cost control in this inflationary environment helped manage the cost pressures.

Trading update

For the month of January 2024, total JB Hi-Fi Australia sales were up 2.5%, total JB Hi-Fi New Zealand sales growth was 8.2%, and total The Good Guys sales declined 2.2%.

The company said this was in line with its expectations.

How does JB Hi-Fi plan to grow profit?

JB Hi-Fi said it will continue to stay focused on actively promoting and providing great value for customers, and it’s leveraging its scale and driving productivity to minimise and control costs.

It’s opening new stores – in HY24 it opened four new JB Hi-Fi Australia stores, while closing two. In New Zealand it opened three new stores in HY24, and it’s continuing to target three to five new stores per year over the next three years.

The company is continuing to grow its active customer base across corporate, government and education customers. There is also ongoing development of its e-commerce offering.

Management commentary

The JB Hi-Fi CEO Terry Smart said:

We are pleased with our performance as we cycled the elevated customer demand in the prior year. As expected, we saw the trading environment become more challenging, marked by heightened competitive activity and increased on-floor discounting. Our focus remained on maximising customer demand through delivering consistently high levels of customer service and driving best value for our customers.

Final thoughts on the JB Hi-Fi share price

The JB Hi-Fi share price had rallied 16% in the last six months, prior to today. It will be interesting to see how the market reacts to this – profit has fallen significantly, but the trading update still showed growth.

I think JB Hi-Fi is one of the best ASX retailers, but it is possible for the company’s share price to rise too far beyond the actual challenging circumstances. At the pre-open price, I’m not looking to buy – I’d prefer to invest when people are worried about consumers spending.

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At the time of publishing, Jaz does not have a financial or commercial interest in any of the companies mentioned.
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