First Impression: JB Hi-Fi (JBH) 1H17

JB Hi Fi standalone business: oFor the JB Hi-Fi Australia standalone business, total 1H17 sales up 11.7% to $2.2b, with SSS growth +8.7% (cycling +5.2%).oHardware and Services categories SSS +12.6% and software (13.3% of Aust. sales) SSS -9.4%. o SSS growth in New Zealand (NZ) was weak -4.9% (excluding sales impact of third party prepaid content cards). Note though, NZ is a small contributor to JBH. | Good Guys: For December 2016, total sales were up +0.7%, with SSS down -0.7%; This is in line with management’s expectations given JVP transition impacts. | Comments: A strong 1H17 result driven by sales growth and margin expansion in the JB Hi-Fi Australian business. Strong execution enabled JBH to take advantage of a number of market tailwinds. Market tailwinds that we believe have helped buoy sales include: market share gains following the exit of Dick Smith; the favourable housing market; and the conducive spending environment. Margins benefiting from sales mix (benefit to gross margin) and opex leverage (strong sales on well controlled CODB).