- JB Hi-Fi AGM offers sales update
- Group sales higher, like-for-like sales down
- Tough macro outlook impacting on earnings
- Brokers remain broadly positive on the stock

By Chris Shaw

At its annual general meeting yesterday JB Hi-Fi ((JBH)) indicated like-for-like sales for the first quarter of FY12 were down 3.5% in year-on-year terms, broadly in line with the fall of 3.3% recorded in July. Sales overall rose 6.6% for the quarter.

In the view of UBS the sales result reflected ongoing price deflation in Audio Visual products, promotional activity in IT products and softer Telco sales ahead of the launch of iPhone 4S. As the result was broadly in line with its expectations UBS has made no changes to forecasts, viewing the 1Q12 result as solid given the current macro backdrop.

JP Morgan was a little more negative on the update, indicating it was weaker than had been forecast. Even factoring in the cycling of a less demanding second quarter of FY11, the update has caused the broker to trim its like-for-like sales growth forecasts for 1H12 to minus 2.5%, down from minus 1.1% previously.

The changes to sales growth expectations impact on earnings, with JP Morgan cutting its earnings estimates by 2-6% through FY14. This reflects the view that even allowing for the cycling of easier comparable numbers, there remains downside risk to earnings from the weak discretionary retail environment.

The 1Q12 sales result was also weaker than Macquarie had expected, though the broker has not adjusted earnings estimates as a result. This reflects the fact any shortfall can be made up, as Christmas trading generates about two-thirds of first half revenue for JB Hi-Fi. Management remains confident the interim result will still be solid given new iPhone, movie, music and game releases.