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JB Hi-Fi model suits tough times

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JB Hi-Fi posts modest growth

The electronics retailer has warned investors and shareholders of a tough year ahead.

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Being the first cab off the retail earnings rank JB Hi-Fi is a bellwether for how the sector is travelling. It seems that it's still pretty ugly out there.

JB Hi-Fi's 2013 sales numbers look fairly good at first blush. Total sales for the year were up 5.8 per cent and the second half sales were a more robust 10.3 per cent up. It looks like things improved during the year.

But these numbers are a bit distorting when it comes to getting a holistic picture. The second half of last year (that is, the six months to June 2012) was a disaster - not just for JB Hi-Fi but across the retail board.

So the gains are (in part) the result of comparing oranges and last year's really rotten oranges.

Investors that follow retail know this. They were looking for optimistic sales guidance for 2014. But the JB Hi-Fi management was not obliging.

The store numbers are set to increase 6 per cent over this period but management is forecasting sales will improve by 6 to 8 per cent. This equates to only moderate improvement in same stores sales growth.

Chief executive Terry Smart called it "tough and competitive out there" on several occasions during Monday morning's call to investors.

The analysts were wary that Smart was being overly conservative.

JB Hi-Fi's particular low-cost, low-price model is particularly well suited to the current retail environment where the discount operators are generally faring better.

In the longer term JB Hi-Fi's particular mix of products leaves it vulnerable to competition from online players.

It was an early mover in developing its online store which has been growing at a massive rate.

(Having said this Smart says the rates of growth are starting to come down.)

The company is also moving its offer by opening and converting some traditional stores to the HOME concept.

7 comments so far

  • The rate of growth of its online store is diminishing because it is an utterly terrible website, and an extremely inconsistent performer in terms of actually getting the right product to the customer (if it gets there at all). Word continues to spread of this all over the Internet, and by word of mouth, yet the company appears to have little interest in correcting the easily-solvable problems. Music and movies are more easily procured on Amazon, CD Universe or EZYDvd (and there is better range and better pricing on all three of those sites compared with JB), and with so much competition for all of the other products available in-store and online, it makes it difficult for a company with a sub-standard online presence to grow. Fix the website, fix the warehousing arrangements, retrain or replace the employees who have hindered these aspects to this point, and watch the turnaround. Don't fix them, watch it slump further! Fairly simple stuff.

    Commenter
    Will Scarlett
    Location
    Australia
    Date and time
    August 12, 2013, 3:58PM
    • Well said, Will! The website used to drive me crazy before I stopped even bothering to refer to it. I certainly have better luck instore through, the staff are usually okay, except I do not always want to drive to the stores. Good idea taking on some music gear, since so much of their other offerings are available everywhere.

      Commenter
      Rick Blain
      Location
      Melbourne
      Date and time
      August 12, 2013, 5:55PM
  • Holistic? Don't make me laugh. Ordered an out of stock CD that they said was in stock at other local stores on the 18th July, and have still heard nothing. I offered to pay the full amount too, but they declined. 100% prepayment knocked back, what better incentive? I distinctly remember repeating my phone number twice to the operator. And today in another store, I watched a staff member ignore me twice whilst I looked around for the answers to another query about car radios myself. Then I got the, "Are you right?" approach when they saw me leaning on a display arm akimbo just to make a point I suppose. Give me a spell. Based on the figures in this article, if holistic means that they are only looking at profit margin then they are a success, but if you want to include customer service of old then it's an epic fail in my opinion.

    Commenter
    gazgolfer
    Location
    Melbourne
    Date and time
    August 12, 2013, 4:39PM
    • @gazgolfer, what was the CD you ordered, and at which store did you order it? If it is something that is stocked in numerous other stores in your location, then this is a very ordinary performance, though a little unsurprising from Victorian JB music departments. There are no current stocktaking or end-of-financial-year ordering/transferring pressures on the company, so that album should have been transferred to your store of choice in a period of one to five business days. If the CD were instead an import of some kind, then all JB stores should be ordering them through Rocket Distribution or whoever they are listed under in the store's inventory. This may take longer, and stores do use discretion to determine whether they order the product or get it from another store (this occurs because a store may have ordered and received a CD quite recently, and are reluctant to part with it when they have done the groundwork to get the appropriate product range). Regardless, a month is ridiculous for an already stocked product!

      JB in-store music departments - the cornerstone of the business in its early days - should be full of experienced, friendly and hard-working staff who carry coordinated ranges (so there isn't too much duplication of obscure products, but at least have them available within a region), are capable of scrutinising their inventories and utilising distributor websites to the maximum capacity at all times, and ensure that sales are actually made! With some exceptions, this doesn't appear to be the case - put it down to trampled morale, low pay, poor hiring & firing, no training, and a hierarchy that wants to see the eventual demise of all of its hard-copy media even as vinyls make a comeback. Give 'em stick @gazgolfer!

      Commenter
      Will Scarlett
      Location
      Australia
      Date and time
      August 12, 2013, 7:53PM
  • So if things are going so well at JB HI-FI, why are they systematically firing their fulltime staff?!?!

    Commenter
    Leffy
    Date and time
    August 12, 2013, 5:45PM
    • We should not dismiss that overt consumerism is not as appealing to many who aim for a sustainable lifestyle. Having the latest gadget that opens and shuts is now being realised that it is not the be and end all of living a good life.
      As more people become aware and attain a less consumeristic lifestyle business projections and forecasts will alter accordingly.
      We simply have too many retail outlets attempting to sell us stuff we don't need.
      I think these are positive figures. People are changing and realising overt consumerism is a ridiculous and wasteful lifestyle.
      How much "stuff" do we really need?

      Commenter
      A country gal
      Date and time
      August 12, 2013, 6:22PM
      • My experience of shopping at JB Hi Fi stores is one of poor customer service. You get peskered as soon as ou walk through the door - but once on the other side, if you realise you do need help, staff are all looking the other way. It's exactly the same with the new owners of Dick Smith. Staff there were all busy talking to each other not the customers in their store. I am sure they are cutting waste and reducing stock levels to improve the bottom line in the short term but if people no longer want to walk through the front door in the first place due to poor customer service short term gains will become long term losses. In my experience Australian retailers, including JB Hi Fi have a long way to go to regain the trust of the average Aussie consumer.

        Commenter
        Jason
        Date and time
        August 13, 2013, 4:28AM

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