Investors not buying JB Hi-Fi’s big profits

Key Australian retail bellwether JB Hi-Fi has recorded hugely profitable full-year financial results. Results posted on Monday show JB Hi-Fi Australia sales rose 7.5 per cent for the year to $7.1bn, with profit rising 6 per cent despite tighter margins. Despite a higher final dividend and a special dividend for shareholders, investors were not convinced of the company’s worth, with the share price losing 8 per cent in the first three hours of trading. JB Hi-Fi is a key indicator of consumer confidence in Australia; the $12.5bn company is the third-largest company on the ASX discretionaries sector. The share price fell on Monday morning after the company announced chief executive Terry Smart would be stepping down after 20 years in charge. The financial results were better than market expectations and bolstered by sales at premium home appliance retailer E&S, which the company bought in September. JB Hi-Fi Ltd also owns The Good Guys, which posted a 6.9 per cent lift in sales ($2.9bn) and an even fatter profit increase (to 8.2 per cent). The group’s overall net profit was up 5.4 per cent (to $462.4m) but was dented after The Good Guys settled a lawsuit with the competition regulator for $13.7m over misleading statements about store credit. At JB Hi-Fi’s Australian stores, increasing sales were driven by the new Nintendo Switch despite more discounting and promotions cutting into margins. Compared with the year prior, JB Hi-Fi New Zealand proved more profitable in all key measures. The outgoing chief executive also presented shareholders an increased dividend and a special dividend. “It has been another strong year of sales and earnings, as we built on the momentum of the previous year,” Mr Smart said. “The company stayed focused on its core proposition of driving great value and delivering consistently high levels of customer service which continued to resonate.” A final dividend of $1.05 was declared, bringing the total ordinary dividend to $2.75, a $0.14 increase on last year. JB Hi-Fi will also pay a fully franked $1 special dividend next month. Mr Smart began working for the company in 2000, took a short break and came back in 2017, revamped The Good Guys and was reappointed group chief executive in 2021. “The decision to leave was a difficult one to make, having been involved with the company for many years and being able to work with one of Australia’s and New Zealand’s best and most respected retail teams. “I am proud of what we have achieved over the years.” Chief operating officer Nick Wells will become chief executive, effective October 3. “I have worked very closely with Nick for many years, particularly since my reappointment as group chief executive in 2021,” Mr Smart said. “Nick has a great knowledge of the group’s businesses and is highly respected by both our team members and stakeholders. “With the support of the best retail management team in the market, I am sure that the group will continue to go from strength to strength under Nick’s leadership.” Chairman Stephen Goddard said under Mr Smart’s leadership, sales and profit grew, and the share price hit record levels. “We are sorry to see Terry go and wish him all the best for the future,” Mr Goddard said.