JB Hi-Fi unfazed as sales defy gravity

When I asked Smart about JB’s “view from home” on the economic environment – the economic outlook, inflation, interest rates and unemployment, his response suggested that he was less concerned with matters over which JB management had no control.

JB Hi-Fi’s managing director, Terry Smart, isn’t worried about what the consumer confidence polls are saying.Credit:Arsineh Houspian

He knows how much flexibility he has to order inventory, he knows how much leverage JB management has to control costs, and how they can control most customer prices.

“We are a bunch of optimists. We’re planning category by category and we think consumers are still spending,” Smart said.

Translated his comments by reading – we are just a group of retailers focused on what we are good at – retail.

However, JB’s experience with the supply chain issues that plagued most companies at the start of the year — and remain a key reason for inflationary pressures — jumped 75%, according to Smart. The blockages are mainly the result of a shortage of available containers.

And then there’s the whole debate about defining JB’s position on the spectrum of discretionary retailers versus non-discretionary retailers. In other words, where do its products fit between milk/bread and a new Porsche model.

According to Smart, many JB and Good Guys products are closer to the baked bean end of the spectrum. Its technology-driven products are often seen as necessities rather than luxuries, such as the latest Samsung or iPhone mobile or the latest computer, the latest game console or even the latest HDTV.

“Much of the technology we use is so integrated into customers’ lives that they will upgrade because they want the latest products,” says Smart.

JB’s confidence in its ability to jump over the cliff of consumer demand stems from the brand’s association with fair value – an important asset in times of tight household budgets. However, it remains to be seen how immune JB is to the ravages of a slowing economy and poor consumer confidence.

Despite a positive start to the current financial year, considerable uncertainty hangs in the air. JB’s share price fell yesterday in line with other discretionary retailers including Kogan and Harvey Norman, while the broader stock market was in positive territory.

JB’s numbers suggest he’s on solid ground, but there’s no guarantee things won’t turn sour once the next round of rate hikes kick in.

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