Why did JB HI-FI’S HY 2020 financials shock the market?

JB HI-FI (ASX: JBH) is emerging as a popular, reliable and financially healthy stock in the recessionary retail market. JB HI-FI  rocked investors with their recent financials. JB HI-FI is becoming not only a store where we buy our family presents but also an attractive investment. Today we will discuss why JB Hi-Fi’s rise on Monday caught media attention, why growth for the company is not new and whether they are worth the investment.


Why was JB-HI-FI up 15% on Monday?

Price Sensitive Event (PSE) one: 2020 Half-year results – 10th February 2020

JB HI-FI captivated the eyes of investors with an impressive Half Year (HY) 2020 results. The most pleasing results included:

  • 9% increase in sales, totalling $4billion
  • 9% Increase in Net Profit After Tax (NPAT) to $174.4 million

JB HI-FI Australia experienced sales growth of 5.1% to $2.72 million and profit growth of 4.8% to $600.8 million. Communications, Audio, Computers and accessories were the vehicles driving up JB HI-FI Australia’s spectacular financials.

Moreover, JB HI-FI New Zealand stores sales were up 0.8% to NZD132.8 million with online sales growing by 22.3% to NZD9.6million.

Also, the Good Guys, which JB HI-FI acquired in 2016, recorded a 1.5% increase in-store sales and a 12.6% increase in online sales. Computers, dishwashers and communications were the driving factors for Good Guys’ growth.

In turn, screaming financial confidence across all three JB HI-FI divisions. Consequently, investors rallied behind JB HI-FI causing the 15% surge on Monday.


PSE two: Dividend/distribution – 10th February 2020

JB HI-FI announced an 8.8% increase in their dividend to $0.99 per share. The divided jump highlights JBH’s improvement in profitability and the ability to become a cash flow asset for investors.



Growth is not new for JB-HI-FI

While JBH shocked investors on Monday, growth is not foreign for the electronics giant. JBH is up 150% YTD but why?

Screenshot (52)

Short answer: Diversification of products

In the 21st century games, DVD’s and music records do not fuel retail success. Just imagine, how many Video Eazy’s and Blockbusters have closed in 2019. Yet, JBH is hitting new financial highs. JB Hi-Fi saw the internet revolutionizing the retail market. So, what did they do?

JB moved away from DVD’s, CD’s and games to focus more on TV’s, computers and white goods. Which is demonstrated with JB acquiring the Good Guys in 2016. JB’s diversification is driving up financials. Especially with dishwashers driving Good Guys Sales and Computers and accessories driving JB HI-FI Australian sales.

Areas such as dishwashers and computers demand more face to face interaction. Allowing JB HI-FI to continue their profit train especially when their customer service is impeccable.

Moreover, JB HI-FI continues to profit off the internet with their online sales hitting all-time highs in HY 2020.

Is JB-HI-FI worth the investment in 2020?

Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.

JB, along with Harvey Norman Holdings (ASX: HVN), appears to be the only bullish stocks in the bearish retail industry. With likes of Myer Holdings (ASX: MYR), The Reject Shop (ASX: TRS) and Jeansweat being hammered with weak sales. Meaning investors will flock to JB as a confident investment while the other businesses crumble.

2019 taught us that JB’s share priced is moved by financial reports. With JBH experiencing a 2020 January sales growth of 6.5% and 1.4% for Australia and the Good Guys the trend look upward. The release of more growth will only fuel more surges.

Moreover, they pay a dividend. I personally love the JB HI-FI business model as a customer and investor. Making it a top ASX retail stock in a portfolio.

However, the recent surge might have overvalued JB. The possible overvaluation is supported by Citi Bank, Consensus and Morningstar. Meaning now is not the time BUY. Watch JB’s financial updates, undertake your research and a possible entry point could open.

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The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.

Written by Patrick McLoughlin, Associate of Youth Investment Group

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