James Thomson Editor

James Thomson is the editor of BRW. Previously he was editor and publisher of SmartCompany and a senior editor at Business Spectator. He writes regularly on Australia's wealthiest entrepreneurs and has deep expertise in small business and the mid market.

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Smart moves: JB Hi-Fi’s sweet revenge on the shorters

Published 12 February 2013 08:18, Updated 13 February 2013 10:18

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Smart moves: JB Hi-Fi’s sweet revenge on the shorters

JB Hi-Fi CEO Terrry Smart has moved the company away from the moribund TV market into new areas such as whitegoods Photo: Elke Meitzel

Mark this down as a victory for the downtrodden. On Monday, JB Hi-Fi got sweet revenge on the short sellers who have been targeting the stock for more than a year.

The company’s half-year results were more credible than stellar, with the group posting a 3 per cent rise in net profit to $82 million for the six months to December 31 on the back of 2.3 per cent rise in revenue.

But this increase in sales was driven by the opening of 11 new stores during the half. Comparable store sales fell 3.5 per cent during the period, underlining pressure the retail sector remains under.

The outlook provided by chief executive Terry Smart didn’t exactly speak of golden times ahead either. While comparable store sales rose 4.2 per cent in January, the company is relatively cautious and expects its full-year net profit to be in the range of $108 million to $112 million, up from the previous year’s $104.6 million.

Still, the fact the news wasn’t absolutely horrible was enough to send the short sellers into the market to buy stock to cover their position.

The result was that JB Hi-Fi shares soared 17 per cent to $12.89 – underlining just how popular a “short” this was – alongwith other retail stocks such as Harvey Norman and Myer.

Smart has been cool under the pressure of the shorters’ attacks, but he must have allowed himself a smile when the market closed last night.

His strategy of continuing to open new stores despite obvious headwinds has allowed JB Hi-Fi to protect its revenue and earnings base while it tries to tweak its model.

The company is shifting away from television sales, for example – they dived an ugly 18 per cent on a comparable store basis during the half – and towards white goods sales, a new category for the chain.

Smart has also managed to boost the company’s online sales by an impressive 40.3 per cent, although they still only represent 2 per cent of total sales.

Will the short sellers leave JB Hi-Fi alone? Maybe not for long, particularly if consumer and business confidence remain low and if there is any sign of deterioration in the unemployment data.

But it appears to be well placed for the retailer’s long, slow march back. And if the promise of January’s sale result can continue into the rest of the year, perhaps Smart will get something else to smile about.

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