Inflation, Rates Finally Lower Volume on JB Hi-Fi

The reality of the Reserve Bank’s rate rises and falling real household incomes has finally caught up with electronic and whitegoods retailer JB Hi-Fi which said its Australian sales slowed sharply in the three months to March compared with a year ago.

Same-store sales (the best measure of sales performance by a retailer) at JB Hi-Fi Australia fell 0.1% compared with the same time in 2022, while The Good Guys whitegoods business saw sharper fall of 3.8%.

Total sales were up only 0.8% in the quarter for JBH Australia, while sales in NZ were up 10.8% and down 3.8% for The Good Guys (meaning the number of outlets didn’t change over the 12-month period in those parts of the company).

Sales at the company’s New Zealand stores were up by 10.8% because the previous period was subject to Covid restrictions and lockdowns, especially in and around Auckland (but that was down from more than 14% in the December half year).

That means the company’s sales actually went backwards over the three months in real terms as the Consumer Price Index rose 1.4% in the same quarter.

In the 9 months to the end of March, JBH Australia’s sales growth slowed to a sub-inflation 5.8% from 6.5% for the first 9 months of 2021-22. The 9-month figure was also well under the 8.6% growth in total revenue for the six months to December.

Sales in the core business, JBH Australia for the December half were up 8.5% on a comparable store basis, so the slowdown in the three months to March to a negative growth rate for the quarter was more a plunge than a slide.

The drivers in JBH’s slowing pace of sales growth were the impact of the RBA’s rate rises and jawboning about the need to control inflation and rising fears of an economic slowdown, plus falling real wages.

Those factors were again confirmed in the March monthly retail sales data from the Australian Bureau of Statistics on Wednesday (See separate story).

In a presentation to the Macquarie Australia conference on Wednesday, CEO Terry Smart will point to the advantages that JB Hi-Fi’s low-cost operating model and multichannel strategy provide in the current trading environment.

The efficiency of the group’s low-cost, no-frills retail model means that the company can “compete effectively with traditional competitors and new market entrants”, he said in presentation documents lodged with the ASX.

He made no comment on any guidance for the full June 30 year.

For all that, investors still liked the report and sent the shares up 2% to $45.48 on a day when the wider market sold off heavily for a second day thanks to the surprise RBA rate rise.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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