big jump in profit with big fall in price, page-5

Bad music for JB Hi-Fi as shares crash
Nabila Ahmed
February 13, 2008

SHAREHOLDERS of music and electronics retailer JB Hi-Fi ignored a record 60% jump in first-half profit to push the stock to its biggest fall in 2½ years on concerns soaring interest rates and fuel prices will choke the flow of retail spending this year.

JB Hi-Fi reported a profit of $41.9 million for the six months to December 31, and doubled its dividend payment from a year ago to 10¢ a share. But it felt the wrath of the market after only narrowly beating analysts' expectations. JB shares slumped $1.05 to $11.59.

Chief executive Richard Uechtritz said his company would be cushioned from any impact of a slowdown in spending because of a younger, "cooler" customer demographic with a robust appetite for JB's "highly desirable" electronic goods. He said a low-cost model would also help the retailer.

"I guess people are acting on the basis that the interest rate rises and the tough words of the Reserve Bank will drive expenditure down and we'll get caught up with it," Mr Uechtritz said.

"The feedback is that hedge funds are working overtime shorting retail stocks right around Australia as they have seen retail come down in the US and other countries.

"I am no economist but I do know what we've had five or six interest rate rises in the last 18 months to two years and we've just been through our strongest trading period ever."

Riding on strong Christmas demand for its CDs, DVDs and new product categories of computers and video games, JB posted sales growth of 18.8% at stores open for at least a year.

Mr Uechtritz said momentum had continued in sales in January and February, and JB had firmed up sales guidance for the year to $1.8 billion (from $1.7 billion) and was expecting net profit to jump by between 41% and 49% to $57 million to $60 million, but shareholders seemed less than convinced about the certainty of future growth.

Analysts have predicted retail spending will slow from the middle of the year as successive interest rate rises force consumers to tighten their belts.

Other retail stocks were also sold off yesterday, including Harvey Norman, David Jones, Woolworths and Wesfarmers.

JB will pay a fully franked dividend on March 19.

source: http://business.theage.com.au/bad-music-for-jb-hifi-as-shares-crash/20080212-1ru9.html