JB Hi-Fi 1H25 Earnings Call Highlights

JB Hi-Fi (ASX: JBH) shares opened 5.5% higher on Monday but were quickly sold down to breakeven within the first hour of trade. By noon, the stock was down more than 4% despite reporting a broad beat for first-half earnings.

1H25 Earnings Summary

• Sales up 9.8% to $5.67 billion vs. $5.52 billion consensus (2.6% beat)

• Gross margins of 21.8% vs. UBS estimates of 22.2% (180 bp miss)

• EBIT up 8.6% to $419.9 million vs. $409 million consensus (2.7% beat)

• NPAT up 8.0% to $285.4 million vs. $278.3 million consensus (2.5% beat)

• Interim dividend up 7.6% to 170 cents per share vs. 166.5 cents consensus (2.1% beat)

Earnings Call Highlights

The below topics have been answered by CEO Terry Smart and CFO Tom Kierath.

Gross margin performance & pressures: “Gross profit increased 6.4% to $846.4 million with gross profit margin down 17 basis points to 21.8%, driven by a combination of sales mix and competitor activity.”

Competition activity: “We remain cautious given the uncertainty in the retail market and the continued competitor activity we're seeing.”

Focus on sales vs. margin: “Our focus remains on maximising demand through always driving value for our customers and providing consistently high levels of customer service.”

Promotional activities: “Well-executed Black Friday and Boxing Day promotional periods drove strong sales in categories such as mobile phones, small appliances, and computers.”

New store openings: “We are targeting five new stores in FY25, two were opened in the first half.”

JB Hi-Fi memberships: “We need to continue to leverage JB HI-FI Perks membership program, which is now sitting at about 2.1 million, and we got to continue to grow that base.”

AI device impact & outlook: “We want to leverage the new AI device opportunity, potential for AI-enabled device tech upgrades.”

January trading performance: “Total sales for JB HI-FI Australia was 7.4% with comparable sales growth of 7.1%. Total sales growth at JB HI-FI New Zealand was 20.4%, with comparable sales growth of 10%.”

Analyst Q&A Highlights

Can you discuss whether you're spending more on promotions due to increased competition and in which categories you're noticing the competition?

• "Yes. We call it increase is probably more maintained competitive activity but we're really seeing out there."

• "And yes, you can see that in that gross margin, we do talk about the fact that gross margin down slightly in both brands."

• "We're seeing it across the board to be fair. I mean, but definitely in categories like computer is very, very competitive."

Has there been a shift in your focus on price and value, and are you willing to sacrifice more gross margin to drive strong sales?

• "It's always been number one internally on our list. We're very, very focused on top line growth and to get top line growth, we're very focused on ensuring that we get price right."

• "We're seeing a lot more competitive activity. Therefore, we're talking about it a little bit more, but it's just something we think about every single day and have for the last 25 years."

• "Customers are clearly searching for value at the moment. And so we're just making sure we're really doubling down on improving that value to customers."

Have promotional calendars shifted compared to 2024, and what are your expectations for the third quarter?

• "Our planning process starts by ensuring that we are comping the promotions we ran in the previous year."

• "There's not necessarily an increase in promotional activity coming. So I can't really think that there's any real change."

• "Apart from that, it will be pretty much what we've run in previous years."

How will the recent weakness in the Aussie dollar affect your cost of goods sold and inventory costs?

• "We're starting to get talk from suppliers coming through about price rises. Mainly that's coming through as it typically does with the home appliance suppliers."

• "Nothing is yet, but plenty of talk that they'll need to."

Are the increased promotions a response to consumer demand or are larger retailers using promotions to gain market share?

• "It’s really driven by ... when a customer standing in front of a salesperson, and we just – we need to take the deal, they might have got a price down the road from a competitor."

• "It feels like it's just returning to a little bit more normal sort of environment that we would have been used to pre-COVID of this real aggressive on forward discounting offers."

What consumer trends are driving strong sales numbers?

"It’s largely driven by tech categories — phones, computers, and especially computers that are starting to see growth again after a tough few years. There’s a replacement cycle happening, especially with devices that were bought during COVID. Consumers also want the latest devices, and if there’s a good deal, they’re more likely to purchase, like with Apple or MacBooks when they’re on promotion."

How are you thinking about capital management, M&A opportunities, and returning capital to shareholders?

"We maintain flexibility with a strong balance sheet and will continue to monitor opportunities. Last year, we used our capital for an acquisition and returned capital to shareholders. Moving forward, we’ll balance M&A opportunities with maintaining that balance sheet strength and flexibility, ensuring we can return capital to shareholders when appropriate."

This article was generated with the support of AI and reviewed by an editor.