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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.