JB Hi-Fi has upgraded its full year sales and profit guidance after a strong December-half, with net profit jumping 16 per cent to $110.4 million, buoyed by demand for consumer electronics, the demise of Dick Smith and the $870 million acquisition of home appliances chain The Good Guys.
The bottom line profit result was in line with consensus forecasts around $110.3 million, but underlying net profit - before costs associated with The Good Guys deal - soared 31.7 per cent to $125.4 million.
JB Hi-Fi shares jumped $1.68 or 5.9 per cent in early trade on Monday to $30.15.
"This is a very strong result for the JB Hi-Fi business," said chief executive Richard Murray.
Mr Murray now expects total sales for the year to reach $5.58 billion, including $4.33 billion from JB Hi-Fi stores, an improvement on the company's original guidance of $4.25 billion, and $1.25 billion from The Good Guys.
Underlying net profit for the full year is expected to rise by at least 31.4 per cent and as much as 35.4 per cent to between $200 million and $206 million, well above current consensus forecasts around $196 million.
Group sales rose 23.4 per cent to $2.6 billion in the six months ending December as JB Hi-Fi increased its share of the consumer electronics and appliances markets after the demise of Dick Smith and new products such as gaming consoles, virtual reality devices, the Google phone and the iPhone 7 lured customers into stores.
At JB Hi-Fi's Australian operations, sales rose 11.7 per cent to to $2.2 billion and earnings before interest and tax rose 21.5 per cent to $165.6 million, buoyed by higher gross margins and lower operating costs.
Same-store sales grew 8.7 per cent, beating market forecasts and online sales jumped 40.4 per cent to $84.8 million, reaching 3.8 per cent of total sales.
The strong gains continued into January, with total sales for JB Hi-Fi stores up 9.8 per cent and same-store sales up 7.2 per cent despite cycling 6.5 per cent same-store growth in January last year.
However, analysts believe same-store growth will moderate in the June-half as the tailwinds from the collapse of Dick Smith dissipate.
Mr Murray said The Good Guys had had a challenging start to the year due to disruption from the long-running sale process and the shift to a corporate structure, with more than 30 joint venture store owner/managers departing the group.
Analysts believe The Good Guys franchisees pulled forward sales in the months before the handover in late November amid widespread industry discounting.
However, Mr Murray said The Good Guys' performance had improved in the second half and reaffirmed that sales and earnings for the year were expected to be 'in line' with those in 2016.
The Good Guys' sales for the month of December rose 0.7 per cent to a better than expected $263.1 million, but comparable sales slipped 0.7 per cent. The chain contributed earnings of $14.3 million. Sales accelerated in January, with total sales up 5 per cent and same-store sales up 3.5 per cent.
"As indicated at the time the acquisition was announced, given the proximity to the critical Christmas trading period for both JB Hi-Fi and The Good Guys, there would be limited integration undertaken in 2016," Mr Murray said.
"As we move into 2017, we are taking a deliberate and considered approach to how we integrate and leverage the scale of the Group. Our work to date has validated the rationale regarding the power of the combination and the strategic merits of the acquisition," he said.
"We reconfirm our synergy assumptions of $15 to $20 million per year after a three year integration period and remain highly confident in our ability to realise these benefits."
In New Zealand, earnings fell 50 per cent to $NZ1 million after total sales fell 1.7 per cent to $NZ125.1 million and same-store sales dropped 11.2 per cent.
JB Hi-Fi increased its interim dividend from 63¢ to 72¢ a share, payable March 10.
Citigroup analyst Bryan Raymond said JB Hi-Fi was clearly outperforming the broader electronics industry but he was cautious about the sustainability of the growth given the cyclical and competitive risks emerging for the electronics industry.
The housing market is expected to soften and Amazon is expected to expand its services in Australia later this year or early next year.
For full coverage of today's earnings, go to the AFR Results Wrap Feb. 13
More to come
