JB Hi-Fi Earnings: Good Results and AI Optimism Spark a 12% Re Rate!

JB Hi-Fi Earnings: The Market Reprices Quality And AI Exposure

JB Hi-Fi has seen a strong re rate over the past week, up around 12% following a solid 1H FY26 result which showed it could be an AI winner.

At a headline level, its 1H26 result was clean and showed good growth.

Group sales came in at A$6.1bn, up 7.3%. EBIT grew 8.1% to A$454m, meaning earnings outpaced sales growth. NPAT rose 7.1% to A$308m, which is exactly what you want to see from a retailer when the market is focused on profit resilience, not just top line growth.

At first glance, you may think JB Hi-Fi is in a more mature phase of its lifecycle and so is not a business that should be priced on blue sky growth assumptions. The first part of that is true, but the second? Not necessarily.

The AI boom is here, like it or not, and we often hear there will be winners. And this company could be one of them. We know AI is not cheap – as many of the big tech players forking out billions of dollars in AI are finding out. But given the manufacturers are bearing the costs, perhaps JB Hi-Fi may not have to.

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JB Hi-Fi Earnings Suggest an Ordinary Retailer

On the channel mix, group revenue was split between A$5.01bn from stores and other channels, and A$1.07bn online. That puts online plus phone at roughly 17.7% of total group revenue, which is a meaningful contribution, but it also reinforces that this is still a predominantly store led model.

When you break it down by segment and geography, the numbers were broadly solid across the board.

JB Hi-Fi Australia delivered revenue of A$4.12bn, up 6.3%. EBIT came in at A$340.9m, up 7.7%, with an EBIT margin of 8.27%. That is a strong outcome in a competitive category, and the fact EBIT grew faster than sales is the key signal.

The Good Guys recorded sales of A$1.58bn, up 4.1%. EBIT was A$107.4m, up 8.0%, and EBIT margin expanded to 6.79%. Again, the quality is in the earnings growth outpacing the revenue growth.

In New Zealand, sales were NZD268.6m, up 32.6%, with comparable sales up 20.2%. EBIT rose 104.5% to NZD4.5m, lifting EBIT margin to 1.69%. That is a strong growth profile, and importantly, it was profitable for the first half, which adds credibility to the improvement rather than it being purely volume driven.

Cash Rich, Debt Light, A Retailer Built for Volatility

On the balance sheet, JB Hi-Fi remains in a very strong position. Cash was around A$489m, and the working capital profile reflects the normal rhythm of the retail model: inventory at roughly A$1.4bn and payables around A$1.1bn. Inventory is elevated heading into peak retail season, and payables typically rise alongside that, so the mix here is not unusual.

The bigger point is liquidity. There is essentially no debt on the balance sheet, which gives the business flexibility and lowers risk if trading conditions soften.

Operating cash flow was slightly lower, largely because inventories increased by around A$100m. They still generated plenty of cash, but the timing of working capital movements mattered in the half.

But It Could Be a Winner from AI

Putting it all together, its clearly strong earnings outcome for a business. Revenue growth looks stable, and earnings are holding up well, which is exactly the profile that tends to appeal to income focused investors.

Of course, demand can swing with inflation, cost of living pressure, and changes in discretionary spending. Those macro variables can impact both sales momentum and the market multiple investors are willing to pay. But some goods are more ‘discretionary’ than others and JB Hi-Fi’s products are less discretionary than others.

That leads us on to the key reason to be excited about this stock. That is could be a winner from AI – not just because it is exposed to it, but importantly because it will be able to avoid the hefty price tag that many other companies cannot.

JB Hi-Fi is not a maker of AI software or hardware, it just sells end products. So it does not bear the cost of making them but is able to reap some of the revenue for itself. CEO Nick Wells told investors that robotic vacuum cleaners and iPhones were amongst the key drivers of sales growth, especially at the Black Friday and Boxing Day sales events.

It is inevitable that the AI boom will cause people to need to upgrade their technology. And JB benefits through higher unit sales, improved average selling prices, and potentially stronger gross profit dollars. Again, it doesn’t bear semiconductor fabrication costs, R&D risk, or the capex intensity faced by upstream players like chip designers or cloud providers. Its capital model remains relatively asset-light compared with manufacturers.

We will admit that calling it an “AI winner” in the same way as a platform or chip company may be overstating it. Then again, the ASX lacks the AI players that other markets (i.e. the US and Europe do) – there’s slim pickings down under: NextDC, and that’s about it.

So short of investing in those markets, or maybe buying an ETF with exposure to these stocks, JB Hi-Fi could be the next best thing. It could function as a “domestic demand proxy” rather than a technology innovator, in our view.

The outlook

In terms of sentiment, consensus is broadly cautious. Around 14 analysts sit at an average Hold recommendation, and the stock is now trading closer to its five year average P/E of about 15.6. For us, that combination makes this a sensible time to start doing deeper research, especially if you are building a watchlist of high quality cyclicals rather than chasing momentum.