JB Hi-Fi reports financial challenges amid increased revenue
JB Hi-Fi NZ Limited, a retailer in consumer electronics and related products, has released its financial results for the fiscal year 2024, revealing mixed performance.
Revenue Growth Amid Market Dynamics
Despite increased revenue, the company experienced a significant financial loss for the year, primarily due to heightened operating expenses and challenging market conditions.
JB Hi-Fi NZ's revenue rose by 12.3% year-on-year, reaching NZ$327.9 million, up from NZ$292.1 million in FY2023. This increase was driven by higher sales across both physical stores and online channels. In-store sales accounted for the majority of revenue at NZ$285.4 million, while online sales contributed NZ$42.6 million, reflecting a robust 32.4% growth in the digital segment. The company attributed this growth to improved customer engagement and expanded product offerings online.
Profitability and Cost Management Issues
Despite the revenue gains, the company reported a net loss of NZ$6.8 million, a stark contrast to the NZ$3.1 million profit achieved in FY2023. Contributing factors include escalating sales and marketing expenses, which rose by 17.5% to NZ$36.8 million, and a substantial increase in occupancy costs, which more than doubled to NZ$16.2 million. Finance costs also increased significantly, largely due to higher interest expenses on lease liabilities and borrowings.
The gross profit margin saw a modest improvement, rising from 16% in FY2023 to 16.9% in FY2024, reflecting effective pricing and procurement strategies. However, these gains were insufficient to offset the higher operating costs and impairment charges.
Inventory and Asset Management
The company reported an increase in inventories to NZ$53.9 million, compared to NZ$40.7 million the previous year. While this aligns with higher sales volumes, it also reflects increased investment in stock, possibly to counter supply chain uncertainties.
The firm also invested heavily in plant and equipment, with capital expenditures rising to NZ$9.3 million from NZ$3.2 million in FY2023, aligning with its efforts to enhance retail operations and logistics capabilities. However, these investments have put additional pressure on cash flow.
Cash Flow and Financial Position
Operating cash flow turned negative at NZ$3.6 million, a notable decline from the NZ$5 million inflow in FY2023. This was largely due to increased payments to suppliers and employees. Financing activities provided some relief, with borrowings of NZ$16.4 million helping to support liquidity needs. Nevertheless, cash and cash equivalents reduced significantly, closing at NZ$5 million, down from NZ$8.2 million the prior year.
Strategic Outlook and Challenges
JB Hi-Fi NZ is navigating a challenging retail environment marked by rising costs and evolving consumer preferences. The company faces the dual challenge of managing expenses while continuing to invest in growth areas such as e-commerce and store refurbishment. Notably, the increased occupancy costs and lease liabilities signal a need for strategic alignment in property management to ensure long-term sustainability.
Directors' Commentary and Future Direction
The directors have expressed their commitment to addressing these challenges, emphasising the importance of maintaining a customer-focused approach and enhancing operational efficiencies. While the overall market remains competitive, the company plans to leverage its established brand presence and digital growth to stabilise its financial position.
The results underline the complexity of the retail landscape and the need for agile strategies to balance growth with profitability. JB Hi-Fi NZ's focus on cost management and leveraging technological advancements will be critical in shaping its path forward.
