JB Hi-Fi weathers storm as others exit

NZ sales are down at JB Hi-FI, but profits are up. Photo / Greg Bowker

Electronic goods retailer JB Hi-Fi expects to meet its previously flagged A$3.1 billion ($3.9 billion) annual sales target but its profit margins are under severe pressure due to aggressive discounting.

It expects net profit for the 12 months ending June 30 will be between A$100 million and A$105 million.

For the previous year, JB Hi-Fi reported an A$109.7 million net profit which included a one-off restructuring charge of A$24.7 million.

JB Hi-Fi said its gross margin for the March quarter was down 200 basis points compared with a 30 point drop in the six months ended December 31.

The company, which owns 161 JB Hi-Fi-branded stores in New Zealand and Australia and is planning to grow to 214 stores, said the margin pressure is short-term and due to a number of competitors exiting the market or reducing store numbers.

"This consolidation, whilst impacting on gross margin in the short-term, is yet to be reflected in the company's sales to a positive degree, but presents the company with a good opportunity to continue to grow its market share in the medium to longer term," said chief executive Terry Smart.

Dick Smith Electronics, with about A$1.5 billion in annual sales, plans to close up to 100 stores before February 2014.

And Queensland-based WOW Sight and Sound, which operated 15 stores, and reported A$250 million in sales last year, went into receivership in February. JB Hi-Fi said it is negotiating on leases for two former WOW sites.

The company expects to continue discounting into the June quarter.

" JB Hi-Fi will react aggressively to maintain our market leadership," Smart said.