Consumer electronics chain JB Hi-Fi has reported a 22 per cent slide in net profit as closures of competitors stores drove savage discounting across the market and light-fingered customers helped themselves to $4 million in stock.
JB booked a net profit of $104.6 million for the 12 months to the end of June, down from $109.7 million in the previous financial year.
The result was in line with the company's twice-downgraded forecasts for a net profit of between $100 million and $105 million, and 4.6 per cent down from the previous year's net profit after tax of $109.7 million.
Excluding one-off items, the bottom-line result was down 22 per cent from the previous financial year's $134.4 million underlying net profit.
Sales were up 5.7 per cent to $3.13 billion, however when the benefit of new store openings was stripped out, sales from existing JB Hi-Fi branded stores fell by 1 per cent.
Chief executive Terry Smart said performance had been affected by the closure of competing stores in the consumer electronics sector, including Wow Audio Visual and GAME, both of which closed earlier this year, and Woolworths' Dick Smith chain, which is closing up to 100 underperforming stores from a portfolio of 380 sites ahead of a planned divestment.
"There's no doubt the market is going to remain challenging, but at the end of the day all we can do is remain focused on our current strategy and continue to innovate and adapt and remain relevant to the consumer," he said.
"We are in an environment with cyclical and structural concerns, although we feel that on balance it's more cyclical ... we can expect, and are already starting to witness, the strong will get stronger and those less efficient retailers will close. Really this is an opportunity for JB to continue to pick up market share."
A number of analysts expressed concern about the company's gross margins, which fell 94 basis points to 21.1 per cent of sales, after missing out on some volume-based incentive payments and seeing shrinkage - retailer jargon for theft - increase to 13 basis points, equivalent to more than $4 million in stock.
Mr Smart attributed some of the theft to reduced staffing levels as the company sought to cut labour costs.
"When you've got less staff on the floor, there's greater opportunity for any of that opportunist theft can increase," he said.
Citi analyst Craig Woolford rated JB a "sell", citing its the contraction in margins and soft sales outlook.
"The company remains a well-managed business, but competitive pressure will continue in key
categories like tablets and televisions," he said.
"We forecast long-run EBIT margins to slide further as more stores are opened and sales grow slower than operating costs."
Mr Smart conceded that market consolidation would result in lower gross margins as stores marked for closure drastically marked down stock prices to clear out inventory.
"Potentially it has some short-term impact on gross margin but obviously we can pick up sales ... as they continue to close," Mr Smart said.
"It would be a great result if we could not see any further decline for the full year in margin. It all depends on what may happen in the market."
Shares in JB surged as much as 70c, or 8 per cent, to a three-month high of $9.92 on news of the result today.
Mr Smart said the new financial year had begun with continued declines in sales from existing stores, down 1.4 per cent in July, although when new store openings were included sales were up 4.9 per cent.
Federal government payments linked to the introduction of the carbon tax appeared to be behind some of the improvement towards the end of the financial year, with comparable-store sales down by just 0.1 per cent in the second half compared to a 3.1 per cent slump in the first.
"The last quarter did improve in sense of margin ... if some of that come from the fact that people had cheques in their hand and were willing to spend and not negotiate then so be it, but the good news is that has flowed through into July as well," he said.
The company has forecast sales of $3.3 billion for the 2012-13 financial year, up 5.5 per cent, although sales from existing stores are expected to be down by around 1 per cent. No guidance has been issued with regard to profit.
"We expect that it's going top remain challenging out there. At the end of the day we've got no benefit in going out and spruiking high growth, because it's hard to see that at the moment," Mr Smart said.
"There's great things going on in the industry and we will benefit from that, be it new products or consolidation, but it is hard to see that there's going to be any upturn or increased positiveness about discretionary retail at this point in time."
JB Hi-Fi declared a final dividend of 16c per share, fully franked, bringing the total shareholder payout for the year to 65c, down from 77c paid in respect of the previous financial year.
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