JB Hi-Fi’s profits up 10%: Research shows customer loyalty underlies electrical retailer’s strong results

JB Hi-Fi has defied a tough retail environment to post a strong half-year trading update confirming that December half net profit is expected to rise 10%.

The discount electrical retailer’s chief executive, Terry Smart, released the trading update “in view of recent announcements from other retail companies”.

This appears to be a reference to profit downgrades from retailers such as The Reject Shop and Super Retail earlier this month.

But in contrast to The Reject Shop and Super Retail, JB Hi-Fi’s net profit rose 10% to $90.3 million in the six months ended December 31, compared with $82.1 million in the year-earlier period.

Total sales were up 6.8% to $1.94 billion and earnings before interest and tax rose 7.5% to $132.9 million and EBIT margins improved four basis points to 6.8 per cent and gross margins by 11 basis points to 21.6%.

Same-store sales were up 2.8% in the six months ending December. 

Che Carbis, senior commercial director at research company Global Reviews, told SmartCompany JB Hi-Fi’s success in a competitive market can be attributed to consumers belief that the retailer is price competitive and trustworthy, which also results in customer loyalty.

Research published by Global Reviews last week shows JB Hi-Fi is the preferred brand of Australian consumers looking for an online store to purchase a 46-55” television through.

The study followed the journey consumers took between search and the retail brands, including who they knew of, which brands they visited, shortlisted and finally would prefer to buy from.

JB Hi-Fi was initially recalled by 66% of those who could recall a brand, it was then visited by 49% of study respondents and shortlisted by 68%. 

The retailer had a 33% preference rate with 52% of those who preferred JB Hi-Fi doing so because they’d used the retailer before and an equal amount said it was because JB Hi-Fi had the best prices.

“This is not to say that other retailers are not price competitive or trustworthy, but as JB Hi-Fi was the top preferred site these were the main reasons for people selecting them and what people recognise them for,” Carbis says. 

Harvey Norman was recalled by 63%, visited by 46% and shortlisted by 55% while The Good Guys were on 42% recall, 43% visits and 60% shortlisted.

JB Hi-Fi will release its full half year results on February 3, so the retailer is unable to provide any comment until then.