LA Private

Having conquered Oz, JB HiFi takes on
New Zealand

Is the move by consumer electronics and whitegoods retailer giant, JB Hi Fi (ASX:JBH) to go against
the grain and spend the next three years upgrading and expanding its NZ operations a sign that it
believes the Australian market is going ex-growth?

Buried in its 2021-22 results on Monday (most of which were detailed in a brief post end of year
update in July), JB Hi Fi CEO Terry Smart sprang a major surprise with news the company would
be looking to not only polish its existing stores across the Tasman, but look for significant growth
from them.

“The Group recently completed a strategic review of the JB Hi-Fi New Zealand business and believes
there is a significant opportunity to grow and expand the business,” the company said in
its results release.”

JB Hi Fi said that over the next three years, it will be “investing in improving the JB Hi-Fi New Zealand
customer offer, refreshing the store network, opening new stores and upgrading its online platform.”

To lead the repositioning and growth of the New Zealand business, the revealed it had named NZ
veteran retailer Tim Edwards as Managing Director of JB Hi-Fi New Zealand.

“Tim previously worked at the Warehouse Group for more than a decade, including seven years as
CEO of Noel Leeming, and brings deep local experience and long-standing relationships, combined
with a passion for retail,” the company said.

Mr Smart said “We are delighted to welcome Tim to the JB Hi-Fi Group. He is a proven retail executive
with an outstanding track record, particularly in the New Zealand consumer electronics and technology
market. We look forward to growing our New Zealand business under his leadership.”

The results release revealed that JB Hi Fi’s NZ operations were hit by the Covid lockdowns in key
markets, especially Auckland.

Sales only grew 0.3% in the year to June to $NZ262.4 million, with comparable sales up 0.3%. Second
half sales were rose a faster6.3%.

“The key growth categories were Visual, Games Hardware and Smart Home. Online sales in New Zealand grew 56.7% to $NZ43.3 million, or 16.5% of total sales<“ JB Hi Fi said.

Gross profit fell 2.1% to $NZ45.7 million with gross margin down 43 bps to 17.4%. Coast of doing business
was 12.8%, down 36 bps, and in absolute terms declined by 2.5% “as store wages remained well controlled.”

Earnings before interest and tax was up 51.7% to $NZ8.8 million. Underlying EBIT, excluding the impact
of impairments in the current and prior year, was $NZ4.7 million, down $NZ1.3 million.

Australian companies do not single out NZ for mention when looking for new growth, especially retailers.
Woolworths has been a consistent investor in its Countdown chain of supermarkets to keep them
up to snuff when compared to the Australian outlets in look and range.

But NZ, with a population smaller than Sydney or Melbourne, is usually regarded as where Australian
companies extract costs and try and offset currency moves and do not invest very much in growth.

JB Hi Fi’s Australian rivals will be watching its NZ moves closely and will rush to imitate if they see it
is getting some traction in finding new sales growth.

JB Hi Fi is just one of a number of Australian retailers with operations in NZ – Kmart and Bunnings are
major operators, as is Harvey Norman (JB Hi Fi’s Australian rival). Any sales growth will come from
Harvey Norman in particular and local chains like Warehouse and Noel Leeming (where JB Hi Fi’s new
boss in NZ has considerable experience).