JB HiFi bullish despite profit slump

Tough market hurts bottom line.

JB HiFi today reported a full-year drop in net profit of 22 percent to $104.6 million, in line with expectations.

Reflecting the squeeze on margins being felt across the retail sector, profits fell from last year's $109.7 million despite an increase in sales from $2.96 billion to $3.13 billion over the past 12 months.

Sales of computer-related hardware rose 9.5 percent while software sales dropped by almost 3 percent. The company said new 4G devices, Windows 8 and the iPhone 5 would help to buoy sales figures in the coming year.

The company blamed increased competition for the profit slump, citing aggressively low prices being offered by competitors such as Dick Smith and Game as part of recent clearance sales.

But it assured investors the increasingly difficult retail conditions would continue to place more pressure on its rivals while emphasising the relative resilience of its low-cost model.

"The strength of the JB HiFi model continues to prove itself at both the top and bottom of the retail cycle. The core of our success is a best-in-class cost base which has enabled us to manage abnormal levels of price deflation and competitor discounting while continuing to trade very profitably," CEO Terry Smart said in a statement to the ASX.

"Challenging trading conditions have driven competitors with higher cost bases out of the market, enabling JB HiFi to continue to grow both its store network and market share. We are very well positioned for any rebound in consumer spending."

The retailer opened 15 new stores across A/NZ in the past year, compared to 18 in 2011. It plans to open a further 16 in FY2012, while three smaller stores in Victoria and Queensland to close. 

New stores will open in Port Macquarie, Coffs Harbour, North Sydney, Broadway and Tamworth in New South Wales; Fountain Gate and The Glen in Victoria; Bundaberg and Oxley in Queensland; Tuggeranong in the ACT; and Darwin in the Northern Territory. 

JB HiFi has forecast a 5.5 percent rise in sales to $3.3b billion for FY2013. 

The company revealed it would undergo a redesign of its website in the next year. Smart told CRN the website would be freshened up to ensure a smoother customer experience, with improvements to search, display and product information planned.

The retailer’s online sales in FY2012 grew 77 percent to $50.8m for the year, representing 1.62 percent of overall sales.

JB HiFi's share price rose 4.6 percent to $9.65 immediately following the announcement.