The JB Hi-Fi Limited (ASX: JBH) share price has fallen 5% today

Shares in discount consumer electronics retailer JB Hi-Fi Limited (ASX: JBH) have dropped more than 5% today after the company concluded its annual general meeting (AGM) this morning.

The JB Hi-Fi share price is down 5.29% to $47.83 at the time of writing amidst a broader equity markets selloff across the world.

Major highlights from today’s AGM

• Total sales of $7.9 billion, up 11.6% on the prior year for the group. This includes sales from its Good Guys brand and e-commerce platform.

• Earnings Before Interest and Taxes (EBIT) was up 30.5% to $486.5 million.

• Net Profit After Taxes (NPAT) was up 33.2% to $332.7 million.

• Total dividends for FY20 were up 33.1% to 189 cents per share.

• In FY20 the company launched a new e-commerce platform for JB HI-FI in Australia and 3 new home delivery centres. Online sales grew 155%  and represents 7.6% of the company’s total sales.

• The FY21 trading update also shows some strong numbers in Australia where total sales grew by 30%. This represents the July 2020 – September 2020 trading period.

JB Hi-Fi’s business model

JB Hi-Fi is one of Australia’s largest discount retailers in home entertainment. Its brand also includes The Good Guys franchise, which it purchased in 2016. Its main competitor, Dick Smith Electronics, folded in 2016.

JB Hi-Fi’s competitive advantage is in its low-cost business model, where stores typically break even within one year. The company doesn’t have warehouses, and stocks its inventory on site in each outlet, minimising costs. Its business model thus relies on high volume and turnover.  

JB Hi-Fi has cemented itself as the category killer in electronics, similar to Bunnings in hardware, which is owned by Wesfarmers Ltd (ASX: WES). It has a network of 320 stores across Australia and New Zealand, and an online platform.

Opportunities and challenges ahead

Consumer electronics, including mobile phones, are more becoming commoditised products. JB Hi-Fi’s management has in the past lamented about the need to offer incentives continuously to attract mobile-phone customers, for example.

Management has also said that consumer electronic margins will be affected by price reductions resulting from high competition, especially with the arrival of Amazon.com Inc (NASDAQ: AMZN) in Australia in 2017. 

However, JB Hi-Fi’s well-known brand image in the eyes of the Australian consumer has attracted loyal customers and should be able to stave off competition in the short to medium term.

About the JB Hi-Fi share price this year

JB Hi-Fi’s share price has been a runaway tear this year. It began the year with the share price at $38 before dipping to $23.16 in March. It has since recovered to today’s level at $47.83 which represents a gain of 26% YTD.

This compares with a flat YTD return on S&P/ASX 200 Consumer Discretionary Sector (ASX: XDJ)index.

More reading

• Why ANZ Bank, JB Hi-Fi, Northern Star, & SEEK shares are dropping lower
• How did ASX retail shares perform in the latest quarter?
• Is Temple & Webster Group Ltd (ASX:TPW) still a buy?
• 5 major ASX 200 events this week
• The best time to invest may feel uncomfortable

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. dsunarto has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool Australia has recommended Amazon. 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.

The post The JB Hi-Fi Limited (ASX: JBH) share price has fallen 5% today appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3kEfZSy