Why did the JB Hi-Fi share price fall more than 20% in FY22?

One of the beneficiaries of the COVID-19 retail boom was the JB Hi-Fi Limited (ASX: JBH) share price. But things aren’t as rosy now with the retailer’s shares declining over the financial year. The JB Hi-Fi share price dropped by more than 20% throughout FY22.

JB Hi-Fi is a leading retailer of electronics and home appliances. It has three key businesses – JB Hi-Fi Australia, JB Hi-Fi New Zealand, and The Good Guys.

In the first part of the COVID-19 pandemic, there was huge demand for products that enabled people to work, learn, and enjoy entertainment at home.

There may have been a question over how long that demand was going to continue. But FY22 showed consumers still wanted what JB Hi-Fi was selling — and in large numbers.

Let’s have a look at those numbers reported during FY22.

FY22 half-year result

The most important update from the company has been the report for the six months to 31 December 2022.

Share prices can be influenced when investors get the clearest picture of how a company has performed.

JB Hi-Fi said that total sales fell by 1.6% to $4.86 billion, though this was up 21.7% over two years. Online sales increased by 62.6% to $1.1 billion. Net profit after tax (NPAT) fell by 9.4% to $287.9 million – but it was up 68.8% over the two years.

JB Hi-Fi announced an interim dividend of $1.63 per share, as well as a share buy-back of up to $250 million.

The company said it had continued to see elevated demand across all of its sales channels despite the lockdowns.

When lockdowns finished, the company revealed that sales growth had continued.

Ongoing sales growth in the FY22 third quarter

In the three months to 31 March 2022, the company reported ongoing growth for all three of its brands.

The company said it was still seeing heightened customer demand and strong sales growth. This was continuing into the FY22 fourth quarter to date (at the beginning of May 2022).

JB Hi-Fi Australia sales went up by 11.9%. In New Zealand dollar terms, JB Hi-Fi New Zealand sales were up 4.8%. The Good Guys sales went up by 5.5%.

So, what’s hurting the JB Hi-Fi share price?

In the FY22 third-quarter update, the company noted there was ongoing disruption to stock availability and operations arising from COVID-19 and other local and global uncertainties.

Ord Minnett is one of the brokers that recently cut its profit projections for JB Hi-Fi. It expects a hit to sales because of increasing inflation and higher interest rates. That’s why it changed its rating to hold from buy. It cut its price target to $42.

UBS is another broker to have similar negative thoughts about the retail sector due to higher interest rates and more expensive energy and fuel hurting household budgets. Its rating is neutral with a price target of $38.

The post Why did the JB Hi-Fi share price fall more than 20% in FY22? appeared first on The Motley Fool Australia.

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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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