JB Hi-Fi: the consumer electronics giant that continues to win market share

JB Hi-Fi delivered a strong FY25 result, yet so far, its share price is falling. It’s a buy the dip opportunity says this fund manager.
Carl Capolingua

Livewire Markets

We all know how hated the Commonwealth Bank of Australia (ASX: CBA) rally is, with most fund managers having labelled its stellar run over the last 18 months as unsustainable and detached from the company's fundamentals. JB HiFi's (ASX: JBH) stock price success has seen it draw its own fair share of doubters among the professional investment community, with it enjoying roughly double CBA's price advance over the last 12 months at +78% (both are roughly even over the last 5-years at approx. +170%).

So today's seemingly strong result, yet so-far disappointing market reaction in terms of stock price (JBH is down approx. 8%), could be vindication of those who've claimed JBH was priced for perfection. Why have investors responded so poorly to the discretionary retailer's results, and should investors buy, hold, or sell?

Airlie Funds Management Deputy Portfolio Manager, Vinay Ranjan
Airlie Funds Management Deputy Portfolio Manager, Vinay Ranjan

To find out, I asked Airlie Funds Management Deputy Portfolio Manager, Vinay Ranjan. Spoiler alert, Ranjan believes today is more of a "buy the dip" scenario than a "buy the rumour, sell the fact" scenario. Here's what he had to say about JB Hi-Fi’s latest results, and future prospects.


JB Hi-Fi (JBH) FY25 Results Overview

FY25:

  • Revenue $10.55 billion vs Consensus $10.40-10.59 billion (FactSet estimates)
  • Underlying EBIT $707.8 million vs Consensus $684-716.2 million (FactSet estimates)
  • JB Hi-Fi Australia comparable sales growth +5.1% vs FY24 +5.2%
  • JB Hi-Fi New Zealand comparable sales growth +3.8% vs FY24 +2.7%
  • Final dividend $1.05 (fully franked), plus special dividend $1.00 (fully franked)

Forward:

  • Dividend payout ratio to grow to 70%-80% of NPAT vs previous 65%
  • +3 stores in NZ and +5 stores in Aus (1 Aus closure) in FY26
  • Focus is on expanding customer base through improved customer experience, bolstering online sales channels and offerings


What was the key takeaway from JBH's result in one sentence?

Ranjan: The key takeaway is JB Hi-Fi continues to win market share in the consumer electronics category, where they’ve demonstrated great retail execution.

They've done this by prioritising value to the customer, which is what underpins their terrific sales growth. Importantly, they've been able to do this while maintaining gross margin. It was also pleasing to see that momentum has continued into July, with Australian sales up another 6% year on year.

Were there any surprises in this result that you think investors need to be aware of?

Ranjan: Yes, there are three key surprises worth noting. First, obviously the CEO Terry Smart has announced he'll be stepping down in October. Terry's been integral to the success of JB Hi-Fi over the years. He joined the company back in 2000, and while he left for a period, he came back and led the turnaround of the Good Guys business post acquisition from 2017. Since his reappointment to the CEO role in 2021 he's overseen a significant increase in the profits of the business. He's been a terrific leader and it's disappointing to see him go, but I think the company's in pretty safe hands with the incoming CEO Nick Wells. He's been with the company since 2009, was a CFO for a decade, and COO over the last year, so it's probably one of the cleaner management transitions you'll come across in the market. I think the outlook's pretty good there.

In terms of other surprises, I think JB Hi-Fi has got a pretty mature store network, so it was pleasing to see the company announce five new stores for Australia in 2026. Most of those will probably be smaller format stores compared to their traditional format, but it just helps drive that continued sales growth. It also goes some way in explaining that higher inventory balance at the year end.

The final surprise was really that New Zealand comparable sales number. On Friday Nick Scali called a big rebound in New Zealand and JB Hi-Fi confirmed that trend with a 16% comparable sales growth in the fourth quarter and 24% in July. So it bodes well for those consumer discretionary names with exposure to New Zealand.

What do you attribute the market's negative response (shares down approx. 8%) to?

Ranjan: I think the high inventory balance is probably the one risk that people were maybe a bit worried about. You had roughly 6% sales growth in July, but inventory excluding the E&S acquisition was probably up 12 or 13%. So that's generally not a great signal for a retailer, but I think it's perfectly manageable.

JB-Hi-Fi turn their inventory over very quickly, and given they've talked about planned store openings, plus they also mentioned that one of their suppliers was going through an ERP upgrade, they probably took on some inventory ahead of these items just to avoid any disruption. So that's potentially something the market's concerned about if that requires some additional discounting to clear, but I don't see any concerns there.

Would you buy, hold or sell JBH off the back of this result?

RATING: HOLD

Ranjan: We're happy holders of JB Hi-Fi post the result. Consumer discretionary stocks are generally pretty volatile, so we think you want to own the quality names, and we think JB Hi-Fi is definitely one of those. 

JB Hi-Fi has a net cash balance sheet and they've got the ability to grow sales even in weak market conditions just by taking market share. So, we think it's a business that you can own throughout the cycle.

Are there any risks investors need to be aware of?

Ranjan: I think the inventory was probably the only one worth calling out – but as I said – we think it's manageable. We think they’ll turn the excess inventory very quickly, particularly considering those planned store openings. So, we think it's all well explained, but to the extent the stock price is a bit off today, I think maybe some are concerned about that inventory level.

From 1 to 5, where 1 is cheap and 5 is expensive, how much value are you seeing on the ASX today?

RATING: 4

Ranjan: I'd say “4”. I think markets have had a really nice bounce since those April Liberation Day tariffs and their subsequent pausing. But in saying that, there's still stock specific opportunities out there. I'd say probably more at the smaller end which perhaps doesn’t receive as much attention or attract those passive index flows, and obviously with reporting season you're going to get a lot of volatility – so there's going to be opportunities popping up. You've just got to be ready to act.

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Investing is risky. Inevitably you will endure losses. If you can't cope with losing, don't invest.

2 stocks mentioned

Carl Capolingua
Senior Editor
Livewire Markets

Carl has over 30-years investing experience and has helped investors navigate several bull and bear markets over this time. He is a well respected markets commentator who specialises in how the global macro impacts Australian and US equities. Carl...

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