key risk for jbh, page-28

Hi Orlando,

I understand what your saying and I think we think the same thing. We are both saying that there is more to a company that just ROE. I think using ROIC as just one metric in the evaluation of a company is important. As you rightfully mention margins, free cashflow and balance sheet strength are all very important factors. JB scores very highly on all these measures. However, I do think that trying to put too many things into an equation of ROE is not for everyone :)

I think the reason JBs share price is low is people are questioning whether the persistently high Australian dollar will cause a structural change in our economy, or whether this is just a cyclical downturn. This is very hard to assess accurately at this stage in time. Tourism operators have already felt the punch. Retailers are feeling it now. Adaptations are being made- local retailers are creating online stores, tax changes are being mooted, margins are being cut/heavy discounting. JB is the best place to be in retail- as the last man standing in this environment- just about every other retailer in Australia (except maybe the reject shop) would be hit harder first, and I can't envisage a future without an electronic retailer.