Posh TV's, Tabs, Xbox Drive JB HiFi

Written by Oonagh Reidy     29/01/2014 | 10:35 | Category: GAMING

As JB Hi-Fi sales surge, analysts say its all down to Xbox, posh TV's and iPads.

Posh TV

Yesterday, electronics retailer JB Hi-Fi announced a positive 10% rise in net profit, and a 7% sales hike to $1.94 billion, for the six months to December 31 (HY14).

"We believe [the group] enjoyed very strong sales growth over the Christmas trading period, driven by tablets, premium TV's and gaming console sales," Deutsche Bank analysts said in an investor note earlier this month.

Both newly released Xbox One and Sony PS4 consoles were sold out at JB stores nationwide on preorders, while tablets like Samsung's Galaxy Note 3, Tab, iPad, 4K TV (UHD) and headphones were all tipped by the retailer to be big Christmas sellers.

Company shares soared as much as 7% to $19.6 yesterday, as investors rallied following a gloomy period for retail in Australia.

However, the gaming high may not last. 

DB analysts flagged concerns about JB Hi-Fi's gross margins, warning if gaming software sales slumped like US retailer Gamestop, then it would be in a spot of trouble.

JB's gross margin for HY14 rose to 21.6% - up 11bps. 

DB says a number of issues are likely to weigh on gross margins this year, including lower margin gaming sales, home appliances and Commercial sales as well as sharp growth in low margin tablets.

DB analysts are forecasting a 10bps decline in gross margin in FY14 and 4.2% LFL sales growth.   

"If JB Hi-Fi saw a similar reduction in the sales of gaming titles for superseded platforms, the gross margin challenge would be compounded."

DB estimates gaming constitutes ~8% of JB Hi-Fi sales.

A shift by consumers from contracts to purchasing phones outright may also send gross margins south.

Yesterday, the retailer confirmed its maintaining its full year sales guidance of 6-8% growth.