Daily ShareChat: JB Hi-Fi

By Jenny Ruth

Friday 17th December 2010

JBH Hi-Fi, which has more than 140 electrical stores across Australia and New Zealand, isn't immune from the discretionary spending pressure across the economy, says Peter Esho, an analyst at Aegis Equities Research, which is owned by Morningstar.

JB Hi-Fi recently moved to offer 60 months interest free on its entire range of flat screen televisions, Esho says

“This is surprising since JB Hi-Fi has not been about interest free-type retail, instead competing as a high-volume, low-margin discount retailer.”

Esho says the promotion, happening particularly in the lead-up to Christmas, “may be a sign of desperation, a strategy to maintain declining foot traffic as customers perhaps face short-term electronic consumption fatigue,” Esho says.

He doesn't think 3D televisons achieved large penetration rates for a number of reasons including that it's early-stage technology which requires the use of glasses, has limited content and higher price points. The next generation may be more successful.

“We think the first-half financial 2011 will be very soft and will surprise some optimists. Even if JB Hi-Fi does hit sales guidance for the full year – a big if – gross margins will be sacrificed,” he says.

“Things will eventually pick up as strong employment underpins a favourable macro environment, so long-term investors shouldn't be discouraged.

Recommendation: Hold.

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