ASX reporting season preview: JB Hi-Fi

Market Index and Livewire Markets have partnered with Marcus Today's Henry Jennings to bring you a Reporting Season Guide featuring an analysis of 11 ASX 100 stocks. The guide is available here.

This article focuses on iconic Aussie retailer, JB Hi-Fi. Please note the analysis was conducted before the recent market volatility.

What does it do?

JB Hi-Fi is Australia’s largest home entertainment retailer, with over 300 stores across the country and New Zealand. The company has over 2.6 million active members across its JB Perks and Good Guys Gold Services Extras membership programs. The Group also services the commercial, insurance and education sectors, and offers technology and consulting services.

Why is it important?

JB Hi-Fi will be one of the first major retailers to report in August. This result will provide an important look-through for the rest of the industry. If the company’s earnings, cash flow and margins flunk – then what will that tell us about peers like Harvey Norman, Breville and Super Retail Group?

The result comes at a time when Australian consumer sentiment remains deeply pessimistic, near pandemic and GFC levels. The Westpac-Melbourne Consumer Sentiment report flagged that the ‘time to buy a major item’ sub-index hit 76.5. Over the survey’s 50-year history, there have only been a dozen sub-80 readings and ten of these have been in the last sixteen months.

JB Hi-Fi had an impressive run during the February reporting season, with the stock rallying 7.1% on the day of its results. The numbers flagged a 19.3% year-on-year drop in EBIT to $387 million, which was 5.2% above consensus. Analysts were impressed by the company’s cost management and pristine balance sheet ($488 million cash at 31 December 2023).

For FY24, consensus is expecting JB Hi-Fi to report a 19.8% drop in EPS to $3.85 and an 18% fall in dividends to $2.55 per share.

View JB Hi-Fi's fundamentals, announcements and data here.

Chart as at 1 August 2024

Carl’s Technical View: Very strong short and long-term trends, price action, and candles indicate going with the flow is likely the best course of action here.

The JBH chart demonstrates an environment of enthusiasm towards the reward/risk dynamics of the company.

I note strong and well-established short and long-term trends, rising peaks and rising troughs, and predominantly demand-side candles. As long as these conditions remain in place, there’s no reason why the prevailing trends cannot continue.

Previous supply around $65.54-66.37 will likely act as a demand zone. I also note that the short-term trend ribbon has done an excellent job of supporting minor pullbacks. Looking at where the May correction terminated – so too has the long-term uptrend ribbon in terms of supporting larger ones.

As a trend follower, I don’t do targets. The top will be whatever the top is. So, personally, I’m just happy going with the flow here … while it keeps flowing!

Henry's Take

Class act but question marks on retail. Have we seen an AI bump on sales of new technology? Is the consumer really under as much pressure as some would say? Retail trade has remained buoyant although margins may have been sacrificed to boost sales. 3Q trading update was solid but cautious. Riding high but now has to deliver. Tax cuts and refunds may distort the new financial year outlook a little, which may make it hard to extrapolate. Risk is probably to the downside given its elevated share price.