JB Hi-Fi shares fall after retailer misses sales target and watches profit drop 7.6%

Shares in electronics and entertainment retailer JB Hi-Fi have fallen over 3% this morning after the company reported missing its sales target by $250 million, along with declines in both same-store sales and statutory profit.

Chief executive Terry Smart has also said he expects the trading environment to remain challenging over the next year, but insists the company will continue innovating, including with the introduction of an online music streaming service for mobile devices.

“We are pleased with our results in what was a challenging period for retail,” Smart said in a statement.

JB Hi-Fi reported sales of $2.96 billion, missing its guidance of $3.2 billion, although the figure is up 8.3% from last year. Net profit after tax fell from $118.7 million to $109.7 million, although the company says this is due to a restructuring charge for the Clive Anthony’s chain.

Comparable store sales fell by 1.2% overall. In the consumer electronics division, which represents three-quarters of the company’s business, comparable sales growth was 4.1%, while in the software division comparable sales fell by 9.1%.

“It is a testament to the strength of our brand, our systems and processes and the quality of our people in driving this result,” Smart said in a statement, also praising the recent buyback.

“In the last 12 months we have returned over $260 million to our shareholders, through dividends and our off-market share buy-back.”

Gross margin was up from 21.8% to 22%, while the cost of doing business remained flat at 14.5%. A fully-franked dividend for the year of 29 cents has been decided on.

The results come as the retail industry is bracing for an even bigger hit to consumer confidence following last week’s downgrade of the United States’ credit rating and the subsequent impact on sharemarkets. Already this year has seen the collapse of several major retailers.

But Smart says the company will continue innovating, including with its online strategy. He claims online sales grew 51.6% for the full year, and were up by 68.1% in the second half, and that new features including offline pickup will be added soon.

“We continue to enhance the customer online experience with the introduction of a mobile friendly website to browse, explore and transact online, combined with a new gift card module.”

The company is also introducing a new music streaming service that is set to launch in the December quarter of this year. This follows similar announcements from Amazon, Google and Apple in recent months.

“A staged roll-out is anticipated over the quarter for Mac and PC, with a mobile solution to be added shortly after,” the company said.

“We intend to have between six to eight million tracks from 100,000 artists at launch and will continue to grow this number over time. The service will allow for unlimited access and listening to music from your Mac, PC or mobile device,” Smart said.

The company is predicting that, assuming trading conditions remain the same, sales will be up 8% to $3.2 billion – the same as this year’s guidance figure.