JB Hi-Fi Limited (JBH)
HOLD

Switched on

 17 Jan 2023
Sector: Consumer Discretionary

1H23 PRELIMINARY RESULT

Need To Know

  • 1H23 EBIT up 14% on last year as sales increase by 8.6%. Consensus upgrades 15-25% likely for FY23f.
  • EBIT margin higher at 9.1%.
  • Sales growth normalising after COVID but better than market expected.

Strap yourselves in for the 13 February interim result release because JBH has opened the gate for consensus upgrades to earnings and the dividend.

Comparable sales growth at JB Hi-Fi Australia (+8.5%) and The Good Guys (+7.3%) for 1H23 were strong and modestly ahead of what consensus had been expecting at the group level. EBIT of $479m (preliminary) is 12.6% above what the market was anticipating, and this will drive the upgrades.

Online sales for 1H23 reached $752m representing 14.2% of group sales, but this was well down on the COVID-boosted $1.1bn of online sales reported last year – a clear indication of consumers heading back into the stores.

Some of the sales growth has been driven by inflation, including electronics which typically sees declining prices.

CEO Terry Smart said trading conditions have started to normalise after two years of COVID disruption. If this is the new normal, investors will be very pleased indeed. The debate on mean reversion will be on-going, but it seems no-one has told JBH’s customers.

The release contained no discussion on inventory or cash flow, but we are anticipating a very strong cash realisation outcome in the interim result.

Investment view

We had been expecting a gradual easing of sales over the next two years compared to the harsher consensus view. Operationally, JBH has again excelled and delivered a higher EBIT margin for 1H23 of 9.1% compared with 1H22 at 8.6%. EBIT margins are now 250bp higher than pre-COVID with most of the gain due to operating leverage and better gross margins persisting at TGG.

JB Hi-Fi Australia notably impressive with EBIT growth of 16.7% compared to last year.

Consensus upgrades circa 15-25% are expected for FY23f forecasts and we expect this will support the dividend profile. For reference, consensus EPS forecasts prior to this release were 397cps for FY23f and 337cps for FY24f.

Figure 1: Preliminary 1H23 Result

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Stock overview

Share Price

Company overview

JB Hi-Fi is a consumer electronics and whiteware retailer with a 319 store network across Australia and New Zealand.

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