JB Hi-Fi is pinning its hopes on families wanting to sit around big-screen TVs playing computer games to make up for declines in tablet sales.
The electronics and whitegoods retailer says tablet computer sales slipped in July, but believes an expected rise in demand for games in the lead up to Christmas will help bolster its earnings.
JB Hi-Fi posted a strong full year net profit result on Monday, up 10 per cent to $128.4 million for 2013/14 thanks to higher margins and cost cuts across the business.
But it has started the new financial year on the backfoot, with same store sales in July down 5.5 per cent due to a slide in sales of tablets, such as iPads and Android devices.
It’s a trend that newly installed chief executive Richard Murray expects to continue for the remainder of the first half.
“Customers seem to hold on to tablets for longer, especially the higher (more expensive) models, and the older models are handed down within the family,” he said.
“Large screened mobile phones, called phablets, are seen as a viable alternative to tablets.”
Investors punished JB for the fall in July sales, with its shares closing nearly eight per cent lower at $17.84.
While fewer tablet sales will impact on JB’s first half, Mr Murray said other products such as big-screen TVs and gaming consoles were expected to be solid.
Families who missed out on the latest gaming consoles last Christmas are expected to snap them up this year because they’ve come down in price, he said.
There were also more games coming out that made better use of the more powerful consoles.
“This Christmas it’ll be about the family console,” he said.
“Where previously you started with a console of $1,000, you’re probably going to see prices half that this Christmas and that’s making the products much more accessible to consumers.”
Over the longer term, JB is pinning its growth prospects on whitegoods and appliances with plans to convert 26 more stores into JB Hi-Fi HOME stores this financial year.
Mr Murray said the home appliances market, worth around $4.6 billion, was larger than any of JB’s other markets.
The company is targeting trends such as people’s desire to integrate technology into their homes and to use appliances, such as coffee machines, as a fashion statement.
“We’re very clear that we have growth ahead of us,” he said.
“People are proud of their appliances; they’re colourful and more integrated with the interior design of their home.
“The connected home is still in it’s infancy. People like wireless audio, tablets holders on the wall where they can control the front door or turn on lights through wireless systems.”
But Morningstar senior equities analyst Tim Montague-Jones said JB Hi-Fi faces competition in that market, with many other retailers, including Bunnings, having already expanded into whitegoods.
“The market is becoming more competitive so we don’t expect to see any significant increase in revenue from the JB Hi-Fi HOME concept,” he said.
SOLID PROFIT FAILS TO IMPRESS JB HI-FI INVESTORS
* Net profit of $128.4m, up 10 pct from $116.4m in 2012/13
* Revenue of $3.48b, up 5.3 pct from $3.31b
* Final dividend of 84 cents, up 12 cents