The JB Hi-Fi Limited (ASX: JBH) share price is on watch this morning after the electronics retailer delivered its full year results. The market had high expectations for the JB Hi-Fi share price following strong sales since the onset of the coronavirus pandemic. The retailer has largely delivered, with profits up 33.2% thanks to strong growth in sales.
Sales climb as digital takes off
JB Hi-Fi reported total sales of $7.9 billion for FY20, an increase of 11.6% on FY19. Sales momentum was strong throughout the year and accelerated in Q4 as customers spent more time working, learning, and seeking entertainment at home. Sales growth was seen across the JB Hi-Fi Australia and The Good Guys businesses, which grew sales 12.5% to $5.32 billion and 11.2% to $2.39 billion respectively. The JB Hi-Fi New Zealand business saw sales decline 5.7% to NZD$222.8 million due to store closures resulting from New Zealand Government restrictions.
JB Hi-Fi is continuing to invest in its digital and online capacity, including launching a new platform for JB Hi-Fi Australia. JB Hi-Fi Australia online sales grew 56.6% to $404 million, or 7.6% of total sales in FY20, with online sales up 155.2% in Q4. Across the group, online sales totalled nearly $600 million for the financial year, a 50% increase year on year.
Profits and dividends accelerate
JB Hi-Fi converted increased sales into higher profits – underlying NPAT increased 33.2% to $332.7 million. The jump in profits flowed through to the final dividend, which was up 76.5% to 90 cents per share fully franked. This gives a payout ratio of 65% of underlying NPAT. The Board believes this ratio appropriately balances the distribution of profits to shareholders, repayment of debt, and reinvestment of earnings for future growth.
What’s the outlook for the JB Hi-Fi share price?
JB Hi-Fi reported strong sales growth in July with Australian sales up 42.1% for the month. Sales at The Good Guys were up 40.4%, while sales for JB Hi-Fi New Zealand were up 9.1%. This growth may be tempered somewhat by the implementation of stage 4 restrictions in Melbourne, which have forced the closure of 46 JB Hi-Fi stores and 21 The Good Guys stores. Thankfully, online and commercial operations continue to trade and a significant acceleration has been seen in online sales in Victoria since store closures.
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Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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