Tuesday, 10 February 2009

JBH Posts Strong 1H09 Results But Where to Now?

JB Hi-fi Limited (JBH) reported strong 1H09 results despite a tougher retail environment. NPAT was up41% on the prior years result and the dividend was raised by 50%. Other encouraging signs were that gross margins held up and the company paid down $55m in debt from $125m - $75m whilst building cash reserves to $90m. Thus on a net basis the company is debt free.

Looking ahead the company affirmed it's previously announced guidance of 28% sales growth or approximately $2.35 billion. At the time of company AGM's in November last year, JBH sounded the most optimistic of the retailers and that point of view has been vindicated.

However, the question is how well JBH will continue to do in an environment of declining business and consumer confidence. The Rudd stimulus plan should keep consumers spending through the end of fiscal 2009 but the outlook from there remains uncertain.

My take is that the Australian economy will have another leg down in the second half of calendar year 2009 along with the rest of the world as the realization that there will be no second half recovery sets in. After a more than 50% rally off the November lows, JBH stock is not looking particularly cheap. at current levels.