JB Hi-Fi Limited (JB Hi-Fi, the Group, ASX: JBH) is a leading retailer of technology and consumer electronics and home appliances in Australia and New Zealand. The Group operates 330 stores at sites located in most Australian States and employs 15,000 people. Established in the Melbourne suburb of Keilor East in 1974, JB Hi-Fi listed on the ASX in October 2003 when the $1.55 Initial Public Offering (IPO) share price commenced trading at $2.20.

iPhone, tablets and laptops are essential consumer goods for the digital age

JB Hi Fi’s large-scale technology and consumer electronics retailing model is hugely successful because it provides Australian and New Zealand consumers with what they need in the digital age.

Digital technology products like iPhones and computer tablets that provide connectivity to the internet are essential to modern living. Consumer demand for these products remains consistent regardless of income levels or economic circumstances and so could be considered defensive in nature. This is a key element of the JB Hi Fi business model and explains the continuing sales growth recorded by the business through the economic cycle.

Consumers want 24-hour connectivity to the internet because it is the backbone of the modern world in that the internet powers the global economy. Whether it be for work, education, retail purchases, health or social media, electronic connectivity devices are essential for consumers.

These devices include mobile phones, tablets, and lap top computers and are among JB Hi Fi’s top selling products because they are essential to modern living. These items are not generally considered staple goods; however, their essential nature and consumers’ purchasing habits

suggest that they could be considered in the same way as staple goods. Savvy investors applying this school of thought can readily justify JB Hi Fi’s high price earnings ratio in comparison to other listed retailers.

Inflation has not inhibited consumer electronics retailing activity

A remarkable feature of JB Hi Fi’s consumer technology and electronic product sales growth is that it has been consistent throughout the economic cycle, including the current period of high interest rates and rising inflation. There are several reasons for this, although one such reason may not be widely understood by the prevailing conventional wisdom.

In nominal terms goods inflation has impacted the price of all consumer goods, including mobile phones and computers. However, inflation only measures changes in the price of goods, and doesn’t measure the economic value and consumer benefit of the increased functionality afforded by technology enhancements.

For example, the modern iPhone can be carried in a pocket or a purse and is much more than a phone. It is also a camera, a calendar, a watch, an alarm, a voice recorder, can store and retrieve data, photos, videos and documents, conduct instant research, and be used as a gaming machine, as well as play music and movies like a television.

Over the past (say) 14 years iPhone prices have risen by about 80 percent. While this number reflects the decline in household consumer purchasing power, it doesn’t reflect the significant uplift in functionality and resultant economic value received by consumers buying a modern iPhone today compared to the device bought 14 years ago. This phenomenon partly explains the consistent long term sales growth history of JB Hi Fi’s digital consumer electronic products and why these products will continue to support the Group’s upward sales trajectory in the decade ahead.

Another aspect of the inflation argument in terms of consumer electronic goods is the cost of home entertainment products sold by JB Hi Fi, such as flat screen television sets and sound systems. Modern flat screen television sets, on a screen square inch basis, sell for less than their counterparts of 2010 when the screen size was smaller, and the picture and sound quality was inferior to today’s television and sound systems.

This enhanced quality has led to more Australians investing in home entertainment equipment and saving money by spending less on entertainment outside the home. As Australia’s largest home entertainment retailer, this trend entrenches JB Hi Fi’s market positioning leadership in this significant household expenditure item.

Robust FY25 outlook

The first quarter of FY25 has revealed overall sales growth of about 5 percent across the Group. However, the December quarter figures to be released soon will include the Black Friday and

Christmas sales numbers and these will provide a clearer picture of the likely FY25 reported results.

The prospect of lower interest rates in 2025 and the low level of unemployment should see rising revenue and profit continuing in the 2025 financial year. Extrapolating the first quarter numbers for FY25 implies revenue of $10 billion and net profit after tax of $450 million for the Group.

JB Hi Fi’s zero debt and net cash position, and its substantial franking account balance should support the ongoing distribution of fully franked dividends over the long term.