Australian discount retailer JB Hi-Fi believes there is a "significant opportunity" for growth on this side of the Tasman, and has hired former Noel Leeming boss Tim Edwards to lead its New Zealand division.
This comes as mounting cost pressures squeezed the retailer's first-half gross margins and it struggled to pass on mounting costs to the consumer.
The Australian company said in a recently-completed strategic review of the NZ business that it believed there was a "significant opportunity" to grow and expand the NZ operations, which now sit at 14 stores nationwide.
JB Hi-Fi would open new stores, upgrade its online platform to integrate with Shopify, invest in its NZ offering and refresh its store network.
Group chief executive Terry Smart hired Edwards to run the NZ arm as managing director to run the expansion.
"He is a proven retail executive with an outstanding track record, particularly in the consumer electronics and technology market," Smart said of Edwards.
Edwards ran Noel Leeming for seven of the 12 years he worked at The Warehouse Group, before leaving suddenly in September last year when he was the NZX-listed retailer's chief sales officer. Former Warehouse CEO Mark Powell is a director of JB Hi-Fi.
Government data shows New Zealanders spent $11.68 billion on electrical and electronic goods in the March year, up 19% from the year before. Adjusting for inflation, the volume of sales of those goods increased by 12%.
JB Hi-Fi's NZ division operates on skinnier margins than its much larger Australian parent and had those margins squeezed in the 12 months ended June 30.
The retailer's NZ business lifted sales by 0.3% to $262.4 million in the period, with a small decline in sales of hardware and services offset by a 7.4% increase in software sales.
Mounting costs
That wasn't enough to cover its increased costs, with gross margin shrinking to 17.4% from 17.8% in the prior year.
JB Hi-Fi managed to trim its internal costs, saying "store wages remained well controlled", as its cost of doing business narrowed to 12.8% from 13.1% in the prior year.
Earnings before interest, tax, depreciation and amortisation (Ebitda) slipped to $12.2m from $12.3m. Ebit rose to $8.8m from $5.8m when the retailer had to account for a $3.3m impairment.
The NZ division lagged behind the wider group, which reported a 7.7% increase in net profit to A$544.9m (NZ$601.8m) on a 3.5% increase in revenue to A$9.23b. Group Ebit was up 6.9% at A$794.6m.
JB Hi-Fi's board declared a final dividend of 46 Australian cents per share to be paid on Sept 9, taking the annual return to A$3.16 per share, up 10% from the prior year.
Group CEO Smart said the retailer was entering an “increasingly uncertain” retail environment and, as household budgets come under further pressure, customers would be gravitating to “value-driven” retailers.
He said the group was pleased with its start to the financial year, and its continued sales momentum and strong sales growth rates over three years.
That was primarily in Australia, where sales were up 9.7% in July from the same month a year earlier. NZ sales fell 0.9% in July from a year earlier.
The ASX-listed company's shares fell 1.2% to A$45 in early afternoon trading.
This story has been edited to clarify Tim Edwards is the former chief of Noel Leeming.
