JB Hi Fi (ASX:JBH): With a 90% gain in 2024, it is the ASX’s most in vogue retailer!

Few retailers have had an outstanding CY24, but it is hard to argue JB Hi Fi (ASX:JBH) has not, given its near 90% share price gain in CY24. While many ASX retailers’ customers have substantially cut back spending, this has not been the case with Australia’s largest electronics retailer, at least enough to concern investors.

What many seem to forget is that JB Hi-Fi also owns white goods retailer The Good Guys and solid results from its namesake electronics stores have masked underperformance here. Could things turn around and The Good Guys contribute to growth in the business, or could it continue to underperform to the extent investors might actually worry?

Who is JB Hi Fi (ASX:JBH)?

JB Hi-Fi is one of those companies that needs little introduction, in being Australia’s pre-eminent retailers, selling consumer electronics and home appliances. It was founded in 1974, listed on the ASX in 2003 and today has over 300 stores in Australia and New Zealand. In addition to the stores bearing its name, it also owns the Good Guys, having purchased it for $870m in 2016, in an aim to increase its market share.  

Avoiding the pandemic, then avoiding inflation

The company avoided a downturn during the pandemic thanks to its significant online presence that had been built during the 2010s. And it was seeing an unexpected boom from customers looking through products that would help them both work and relax at home during lockdowns. Indeed, the company grew its sales by 12% in both FY20 and FY21. It is important to note the company has stores in New Zealand that actually lagged in FY20 (declining over 5%) but rebounding in FY21 (growing by 17%). 

Many companies saw booms due to the pandemic too, only to see demand drop off – Kogan (ASX:KGN) is one company that springs to mind. Also not helping matters was high inflation that would eat into margins, even if revenues were stable.

That was not the case here. FY22 saw 3.5% growth to $9.2bn and its profit was $544.9m (up 8%). FY23 saw $9.6bn in sales (up 4.3%) although its profit declined by 3.7% to $524.6m. Considering it made $6.85bn in sales in FY18 and a $233.2m profit, not a bad result when you put it into the context of several years.

FY24 was a stagnant year, but investors were still pleased

At first glance, JB Hi-Fi’s results for FY24 were nothing to crow about. Its sales were flat and its profit went backwards. But the share price run did not slow down.

Source: Company

Why? Perhaps JB Hi-Fi investors think the Stage 3 tax cuts will help its FY25 results. And not just its JB Hi-Fi stores, but towards the Good Guys too. An extra $1,100 in most people’s pockets could tempt them to buy some new white goods, or a new laptop.

In Q1 of FY25, the company has reported 4.9% sales growth for JB Hi-Fi Australia, 19.6% for New Zealand and 5.3% growth in the Good Guys. So far so good.

Obviously, continued growth is predicated on everything going right. No further increases to the RBA cash rate, or Black Swan events to smash consumer confidence. And it also assumes people continue spend the extra money rather than save it.

So should you buy JB Hi-Fi shares?

Not if you trust the 14 analysts who cover JB Hi-Fi – they have a target price of $74.60, a >20% discount to the current share price. Regardless, they forecast $10.3bn revenue and $4.17 EPS in FY25, followed by $10.8bn revenue and $4.35 EPS in FY26, then $11.2bn revenue and $4.52 EPS.

JB Hi-Fi is trading at 22.4x P/E for FY25 and 11.3x EV/EBITDA. Not bad, although it has a huge PEG multiple of 5.9x. In our view, you should only buy JB Hi-Fi if you think the Good Guys can propel it to further growth. We are impressed with its FY25 performance so far, but are not sure one can justify buying in at this price.

The Good Guys will be key

We observed that The Good Guys (responsible for ~30% of sales) has lagged other divisions. Sales in FY23 only rose 0.8% and 1HY24 (the first half of FY24) saw a concerning 9.9% slide. This was despite the Black Friday and Christmas shopping periods. As we noted above FY25 has seen a positive start with 5% growth in the first quarter, but there is a long way back. Outperformance of this division could lead to a further re-rating of shares.

In the end, this company is a solid business with a strong footprint of consumer electronic stores that (as we’ve seen of late) are solid enough to keep the Group’s top and bottom lines growing.

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