Australia | Aug 13 2025
Another earnings result 'beat' by JB Hi-Fi was not enough to prevent the shares from selling-off on the day. Over-reaction? The debate is alive.
-JB Hi-Fi result yet again slightly beat expectations
-Outlook includes multiple tailwinds
-Post re-rating, the debate centres around valuation
-Bell Potter labels JB Hi-Fi one of the most productive retailers globally
By Greg Peel
For years electronics retailer JB Hi-Fi ((JBH)) has beaten earnings result expectations, often against prevailing retail winds, to the anguish of those who for a long time shorted the supposedly overpriced stock. That strategy is now long abandoned.
The local 'tradition' has now created a new problem: if JB Hi-Fi is expected by all and sundry to continuously surprise to the upside with its result, is that then still a surprise?
On Monday, the retailer released an FY25 result which yet again beat consensus on underlying profit, but only by 1%. What’s more, the highly respected CEO –-25 years in the business-– announced his pending retirement some six to twelve months ahead of expectation.
What does he know? Has JB Hi-Fi reached peak success? Time to leave on a high?
Traders responded to the FY25 update by selling down the stock -8.4%.
The Result
JB Hi-Fi’s 1% consensus 'beat' was a result of 8.5% year on year profit growth, 10.0% sales growth and 9.4% earnings growth.
Sales growth was a strong outcome in the context of a tough consumer environment, Morgans suggests. Like-for-like sales were particularly strong in the fourth quarter compared to the third, despite the comparables getting tougher (from -0.3% to 2.5%). This was nevertheless driven by the successful launch of the Nintendo Switch 2 gaming console, which management called out as the reason behind the uplift.
JB Hi-Fi New Zealand also finished the period strongly and continues to build scale and take market share off a low base, Morgans notes. Whitegoods subsidiary The Good Guys reported solid growth, although slowed in the second half compared to the first (4.2% to 8.8%). Recently acquired kitchen & bathroom business, e&s, reported sales growth in line with expectations, up 5.2%.
Sales in July have slowed from the fourth quarter for JB Australia (5.1%) and The Good Guys (3.8%) but remain solid. JB New Zealand’s like-for-like sales accelerated in July (24%), but e&s has turned negative (-2.7%).
The Good Guys' gross margins were the standout, brokers agree, up 28bps to 23.5%, with the second half up 90bps to 23.9% (close to highs of covid). Management flagged those second half margins were unlikely to be sustained and is targeting 23.5%, in line with the full year. JB Australia margins were down -20bps to 22%, in line with pre-covid levels.
JB New Zealand continues to scale up off a low base. Cost of doing business was well managed, in Morgans’ view, up 24bps to 13.3% of sales, benefitting from some operating leverage in JB Australia offset by incremental staffing costs in The Good Guys to support sales.
As expected, JB Hi-Fi announced a special dividend, but at 100cps, ahead of forecasts of 80cps. This points to ongoing strength in cash generation and balance sheet positioning, Macquarie suggests.
Moving forward, the company will pay out 70-80% of profit (65% previously), which results in more consistent cashflow returns to shareholders, Macquarie points out, while still permitting balance sheet flexibility for strategic investment.
All else equal, JB Hi-Fi will remain in a circa $60m net cash position following payment of the final and special dividends.
Sell the Fact?
Was an otherwise solid result and slight beat simply not enough for salivating investors? Some analysts are unsurprised by the sell-off on the day, others saw an overreaction.
JB Hi-Fi’s share price rose 27% in 2025 to August 8, compared to the ASX200’s gain of 8%. Arguably, a more stellar beat may yet have resulted in profit-taking.
The greater-then-expected special dividend of 100cps follows an 80cps special dividend in FY24. This equates to a total dividend payout ratio of 85% in FY24 and 86.1% in FY25, Morgans notes.
Given the strong franking credit balance and strong cashflows of the business, JB Hi-Fi has increased its payout ratio from 65% to 70-80% from FY26, but flagged on the conference call it is unlikely to pay further special dividends. In other words, a payout lift but an effectively lower payout than FY24-25.
As for the CEO’s earlier-than-expected retirement, analysts are not the least bit concerned. The incoming CEO has been in the business for 16 years, including ten as CFO, and more recently COO. Bell Potter anticipates a smooth leadership transition with the extensive cross-over period.
Citi does not see the announced CEO transition as a sign that JB Hi-Fi has topped out. The company has historically managed CEO transitions very well, notes Citi, with continuity of strategy and execution. UBS agrees the transition is a little earlier than anticipated, but remains confident strong execution continues.
But what of excessive valuation?
JB Hi-Fi has enjoyed a significant PE multiple re-rating, UBS notes, beyond traditional peers Harvey Norman ((HVN)) and Super Retail ((SUL)).
Yet applying a new framework for high multiple retailers (rising total addressable market, market share gains, robust cost management and prudent capital management), JB Hi-Fi scores well, UBS suggests, and should increasingly be compared to Wesfarmers’ ((WES)) retail divisions Bunnings and Kmart.
Wesfarmers’ forecast FY26 PE of 34.9x remains above JB Hi-Fi’s 23.3x, albeit this premium is likely to be retained, in UBS’ view, as Wesfarmers’ retail divisions operate in more fragmented markets so share gains are more likely.
Given more comparability with Wesfarmers, this broker argues JB Hi-Fi’s PE multiple looks increasingly justified, and following the share price decline, the risk reward proposition looks more balanced.
Yet, on the other hand, while viewing JB Hi-Fi as a strong omni-channel retailer, trading at a circa 23.2x FY26 forecast PE, Morgans sees the stock as fully valued for a business offering mid-single digit compound annual earnings per share growth over the next few years.
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