Morning, and welcome to the JB Hi-Fi Group 2024 full year results investor conference call. Today's call will commence with a short presentation from JB Hi-Fi's Group CEO, Terry Smart, and Group CFO, Nick Wells. Following the presentation, we will open the questions from investors, and the call will conclude around 11:30 A.M. We welcome representatives of the media to this call, and as with previous calls, we will only be taking questions from investors. All media inquiries can be emailed to media@jbhifi.com.au. I'll now introduce and hand over to JB Hi-Fi's Group CEO, Terry Smart. Please go ahead.
Thank you. Good morning, everyone, and, thanks for your time today. As per usual, we'll be talking through the presentation and, as just mentioned, questions at the end. I'll start the presentation onto slide four, the group model. Look, I know everyone's gonna be very familiar with this slide by now. I mean, so I'll just cover off briefly. You know our brands, you know their purpose and their individual product offerings. You know our channels to market, which are multiple channels to market, and our target customers. And, you know, given what we'll announce today, we'll need to add in E&S into this, and, it slots in neatly, targeting a different customer base and a, and customer segments that our existing brands don't reach today.
Value proposition, that is big brands, big range, and importantly, low prices, and the trust customers have in us to deliver this is definitely supporting our sales growth. This is enabled by four key competitive advantages, which I'll detail on the next slide. So over to slide five. Again, you know, most of you will be very familiar with this, by now, so just a couple of call-outs. Foot scale, you know, the large, engaged, and diversified customer base across the two brands, and obviously soon to be three, provides suppliers with the ability to execute promotions and new product launches at scale. High-volume website traffic provides significant marketing opportunities and reach, such as our newly launched marketplace on JB Hi-Fi. With, second one, low-cost operating model.
You know, it's that constant focus on productivity, especially in those non-customer-facing roles, combined with a focus on minimizing any unnecessary expenditure. Onto multi-channel capability. Look, you know, it's really about choice in how customers want to shop with us. It's about reaching a broader audience in a single channel alone and providing convenient shopping experience through the multiple channels we have, such as stores, online, over the phone, and then also including online chat and video chat. Now, this is combined with fast fulfillment, with multiple delivery options, again, giving customers the ultimate choice. For people and unique culture, the key there is that knowledgeable and passionate teams who put customers first. It's a dynamic and flexible environment, which allows us to pivot the business quickly and adapt to any changing market conditions, and our unrelenting focus on safety.
Over to slide six. We remain focused on generating long-term, sustainable growth and having a positive impact on our people, community, and environment, and today, we released our FY 2024 sustainability report. Some of the progress we made in FY 2024 is: for our people, continue to improve gender diversity across the group, with an increase in the number of women in leadership positions at board, senior management, and store management level. Continue to invest in leadership development, that including launching a new Women in Leadership program in Australia and New Zealand, plus ongoing focus on safety, including mental health and wellbeing, psychosocial hazard, and aggressive customer training programs. For our communities, FY 2024 workplace giving donations totaling AUD 4.2 million, and just shy of AUD 40 million since inception.
JB Hi-Fi Helping Hands program won the Gold Award for the Best Workplace Giving Program of the year at the 2023 Annual Workplace Giving Excellence Awards. The Good Guys Doing Good program welcomed 2 new charities, Clean Up Australia and Black Dog Institute, and we engaged an additional 68 suppliers on Modern Slavery, reviewed social compliance audits of 74 factories on our supplier watchlist, and completed an on-site review of 5 factories supplying our JB Hi-Fi private label products. For our environment, solar panel generation installed on 7 stores in FY 2024, bringing the total number of stores to 30, and added Green Power to the group's energy mix, as the group works towards Net Zero direct carbon emissions by 2030.
Improved JB Hi-Fi core private label range packaging, with 100% recyclable packaging used across 77% of the range, up from 56% in FY 2023. JB Australia transitioned to 100% recyclable paper bags, with all single-use plastic bags now phased out nationally, and completed the implementation of battery, phone, and small e-waste recycling kiosks at JB Australia and The Good Guys stores, with 16 tons of batteries and e-waste received for recycling. Turning to page seven, the group performance. I'll take this one as read, as we'll be going through more detail through the presentation. However, today we also announced we have entered into an agreement to acquire E&S Trading, with an initial acquisition of 75% for cash consideration of AUD 47.8 million.
Plus, we have also declared a special dividend of AUD 0.80 per share, fully franked, or AUD 87.5 million, and together with the final dividend, we distribute AUD 200 million to shareholders. Turning to page 8. Again, with the summary of the group's performance, I'll take as read as we'll get into the detail as we go through. So turning to now page 10, and, JB Hi-Fi Group's performance. The summary page there, I'll now go over to page 11 because I'll give you some details through the summary pages. So onto 11. Sales for JB Hi-Fi, sorry, sales for FY 2024 for JB Australia. Total sales increased by 1% to AUD 6.61 billion, with comparable sales up 0.6%.
Sales driven by continued customer demand for technology and consumer electronic products and supported by well-executed and successful Black Friday, Boxing Day, and Tax Time promotional periods. The key growth categories, mobile phones. We saw growth from Apple with our promotional activity and supported by good stock levels, assisting sales run rates. Our small appliances, good growth, driven by range and brand expansion, combined with improved in-store execution. Cameras, we saw good growth from cameras and associated accessories. Games hardware, good growth in console and associated accessories, including the successful launch of new handheld gaming devices. And for services, growth in Telco incentives, installation, and other services.
Software sales, that is music, movie, and games, was 3.6% of total sales, and online sales increased by 2.8% to AUD 1.03 billion or 15.5% of sales, up slightly as a percentage from last year. Onto page 12, and the JB Australia earnings results. Gross profit decreased by 0.9% to AUD 1.47 billion, with gross profit margin down 42 basis points to 22.2%, driven by sales mix and increased level of on-floor discounting. Cost of doing business was 12.6%, up 54 basis points, and in absolute terms, grew 5.5%, with disciplined cost controls helping to manage inflationary cost pressures.
Depreciation increased by 2.8%, with an increase in depreciation on right-of-use assets offset by a decline in the depreciation on fixed assets. EBIT decreased 11% to AUD 491.2 million, and EBIT margin down 100 basis points to 7.4%. Now on to JB New Zealand on page 14. Again, the summary performance there, or the summary of its performance. I'll take that as read, and we'll move on to page 15. FY 2024 sales for JB New Zealand. Total sales increased by 12.3% to NZD 327.9 million, with comparable sales up 1.6%. The key growth categories, which very much reflected Australia with mobile phones, with good growth in Apple and solid in-store execution.
Audio, driven by headphone sales. Games hardware, good hardware availability assisting the sales. IT, driven by smart home and accessory sales. Small appliances, with strengths coming from categories such as personal care, vacuum, and coffee. And we saw software sales, again, that's music, movies, and games, was 5.6% of total sales. Online sales increased by 32.4% to NZD 42.6 million , or 13% of total sales, benefiting from the investment in the new Shopify platform. 5 new stores were opened in FY 2024. Over to page 16, earnings. FY 2024 earnings for JB New Zealand. Gross profit increased by 18.8% to NZD 55.5 million , with gross margin up 93 basis points to 16.9%.
An improvement, albeit off a low base, as we really leveraged that sales growth with suppliers. Cost of doing business was 15.6%, up 141 basis points. In absolute terms, cost of business, cost of doing business grew 23.4% as we continue to invest in new stores and strategic initiatives, with comparable cost of doing business up 5.1. EBITDA was NZD 4.4 million, down 17.1%. EBIT was -NZD 2.3 million and down NZD 6.7 million. Underlying EBIT, adjusted for depreciation that would have been recognized if right- of-u se assets and fixed assets had not been previously impaired, was -NZD 5.5 million, down NZD 3.3 million. Over now to The Good Guys and turning to page eighteen.
Again, with the summary, I'll take it as read before talking some details we move through. Onto page 19. FY 2024 sales performance for The Good Guys. Total sales decreased 4.8% to AUD 2.68 billion, with comparable sales down the same. The brand's core home appliance categories remain resilient, with good growth from categories such as portable appliances and floor care, with refrigeration and laundry remaining very solid. Consumer electronics and tech categories, especially categories like TV, were softer, cycling elevated demand in the prior period. Online sales increased by 1.3% to AUD 387.2 million, or 14.5% of total sales. Onto page 20, The Good Guys earnings.
Gross profit was AUD 621.2 million, with gross profit margin down 22 basis points to 23.2%, driven by on-floor discounting. Cost of doing business was 14%, up 117 basis points, and in absolute terms, grew 3.9%, with disciplined cost control helping to manage inflationary cost pressures. Depreciation grew 4.3%, with an increase in both depreciation on right of use assets and depreciation on fixed assets, and EBIT was down 25.8% to AUD 158.1 million, with EBIT margin down 167 basis points to 5.9%. I'll now hand over to Nick to cover off balance sheet and cash flow.
Thanks, Terry. So starting on slide 22, and with inventory. So inventory was AUD 1.09 billion, up 5.1% or AUD 52.7 million year-on-year, as we deliberately invested in stock to improve availability during the end of financial year sales and into July. Inventory turnover was up 14 basis points to 7 times compared to 6.8 times in the prior year. Payables, which would ordinarily grow in line with inventory, were up 9% or AUD 60 million year-on-year, as strong Tax Time sales led to incremental buying late into June to replenish inventory. As a result, at 30th June, net working capital was below its normal levels. Turning to slide 23 and highlights on the cash flow statement. Operating cash flow and operating cash conversion continued to be very strong.
CapEx was AUD 74.4 million, up 3.8% or AUD 2.7 million year-on-year, with investment in our store portfolio, online and strategic initiatives. Net cash was AUD 302.7 million, driven by that continued strong cash generation and the low net working capital position. Moving to slide 24 and capital management. The final dividend is AUD 1.03 per share, fully franked, down AUD 0.12 per share or 10.4%. The total ordinary dividend for FY 2024 was AUD 2.61 per share, down AUD 0.51 per share or 16.3%, and represents 65% of NPAT. Taking into account the strong financial position of the group, in addition to the ordinary dividend, the board has today declared a special dividend of AUD 0.80 per share, fully franked.
The combined final dividend and special dividend will distribute AUD 200 million to shareholders, while continuing to provide the group with balance sheet capacity to invest in organic and inorganic opportunities. The record date for the final dividend and special dividend is the 23rd of August, with payment to be made on the 6th of September. I'll hand back to Terry.
Thanks, Nick. Moving to slide 26, the trading update. So sales update for July, total sales growth for JB Australia was 5.6%, with comparable sales growth of 5.2%. Total sales growth for JB New Zealand was 12.2%, with comparable sales growth of negative 4.9%, and total sales growth for The Good Guys was 2.7%, with comparable sales growth of the same. And look, it was pleasing to see that positive momentum in Australia continuing into July. Now over to page 28, acquisition of E&S. I guess for those of you in Victoria, most likely know this brand, but still give you a little bit of detail. So E&S overview. Established in 1962 by the Sinclair family. A premium offering across kitchen, laundry, and bathroom product segments.
10 showrooms in Victoria, plus online, plus one showroom in ACT to open this month, and, you know, really delivering highly personalized customer service. They're. They have a strong customer delivery capability, established commercial offering in Victoria, servicing builders, developers, and architects, with the recent opening of a commercial office in ACT. FY 2024 revenue of circa AUD 230 million, and normalized pre-AASB 16 EBITDA of circa AUD 7 million. So the strategic rationale for the acquisition, E&S is highly complementary to the JB Hi-Fi Group's existing brands, providing us access to new and expanded customer segments and product categories, including premium home appliance customer and category, the bathroom category, the large commercial construction customer, and boutique and volume builders and architects.
We expect to be able to continue to grow E&S, both in Victoria and nationally. Transaction details, initial acquisition of 75% for cash consideration of AUD 47.8 million on a cash-free, debt-free basis. Put and call option arrangement in place for the acquisition of the remaining 25% in September 2029. Rob Sinclair to continue as managing, managing director of the business. The acquisition will be funded through existing cash reserves, and completion of the acquisition is subject to customary completion conditions, as in, and is expected to occur in September this year, 2024. Over now to some group focus areas, on page 30. So just a little bit about some of our, our focus.
Retail execution and value promotion, you know, we kind of continue to stay focused, enhancing visual merchandising, refine, improve, install visual merchandising practices to ensure an engaging shopping experience, improve conversion rates. That's just making the most of the existing traffic we have. A solid promotional strategy, focusing on strong promotional programs, especially during those key events like Black Friday and Boxing Day. Drive value, maintain the focused approach on actively promoting and demonstrating our exceptional value to customers, and operational efficiency. Drive, drive these efficiencies to reinvest in customer-facing roles and comprehensive training for staff members. Multi-channel growth, new store openings, two new JB Hi-Fi stores to open and one Good Guys store to open in FY 2025.
Expand our membership program, continue to leverage the JB Hi-Fi Perks membership program and grow the existing base of 1.6 million customers. Launch our online marketplace. We recently did a soft launch of marketplace on JB Hi-Fi website to capitalize on the significant web traffic and expand our range in core categories. And finally, enhance sales channels, grow our phone, chat, and video sales channels to meet the customers' changing shopping needs. Onto New Zealand expansion. New store openings, targeting 5 new stores in FY 2025. Develop commercial sales channel there, identify and cultivate the opportunity for commercial sales. Improve gross margins. We need to now leverage the retail sales growth we're seeing to enhance our overall profit margins, and invest in people and systems. We continue to invest in the workforce and systems to support the ongoing growth.
Commercial growth for JB and The Good Guys, expanding the customer base, continue to grow our active customer base across corporate, government, and education sector. We leverage the new AI device opportunity, our scale and reach to drive sales of the new AI-enabled devices, and continue to integrate with retail and focus on business lead generation through the stores and enhanced delivery experience. And finally, supply chain optimization. Enhanced delivery options. We want to stay focused on creating best-in-class customer experiences, including implementation of a new transport management system. Optimize inventory flow. We want to improve our inventory flow into the stores during peak periods to enhance stock availability for customers and ensure the safety of our team. Streamline the big and bulky product flow.
We want to improve the flow of big and bulky into regional stores, again, to maximize our stock position and ensure team safety. Review supply chain network. We're continuously reviewing the supply chain network to ensure it aligns with our multi-channel strategy and enhances the customer experience. To finish off, we over onto page 33, investment checklist. You'll all know this well by now, so, I'm not planning on covering off, and I think that's, that will finish us off, and we can move into questions. Thank you.
Thank you. We'll now begin the question and answer session. Should you wish to ask a question, please register by pressing Star, then One on your keypad. If you'd like to cancel your registration, please press Star, then Two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Tom Kierath with Barrenjoey. Please go ahead.
Morning, guys. Just a quick one on the July trading. There was one less weekend in July this year versus last year. I think your trading update's 1 July to 31st. I'm just checking if you've adjusted for that, because I presume that you would usually do a bit more sales on a weekend. I think Scali was saying 65%-70% of their sales are on the weekend, so it'd just be good to get some color around that, just on the July numbers.
So we, so with the, whether we adjusted or not, Tom, no, we haven't. It's just a pure calendar month, so we try to avoid adjusting comps. So, that is-
Yep
... straight calendar month. So yes, you're right, there is one less, one less weekend this year than the year before. It's not had a significant impact on us as it is on someone like a Scali. We do have a bit more of a balanced weekday and weekend portfolio. And I suppose there is a little bit of benefit in July this year from some of the strong written sales in June that were delivered in July this year as well.
Yep. Yep, cool. And then, and just secondly, I think at the H1 , you said that in-store labor wasn't kind of back to your normal levels. In the H2 , kind of, was it, or where are you kind of running there, just in terms of, like, service levels, et cetera?
No, we're, we're back to normal now, Tom, so that's all-
Yep.
That's all set.
Great. Thanks, guys.
Your next question comes from Shaun Cousins with UBS. Please go ahead.
Thanks, and good morning, Terry and Nick. Maybe just a question on gross margins in JB Australia, just in, particularly in the H2. You know, promotional frequency seems back to where pre-COVID levels are, were. Is the quantum of promotions less, or is there a mix to product categories that enjoy higher margins, or even a mix to consumers trading down to brands where you make a higher margin? I'm just curious around what's driven the surprisingly strong, stronger than expected H2 gross margin in JB Australia, please.
Yeah, if I can, just on the overall gross margin on the H2, and this plays out in the H2, I think a couple of things going on there is, you know, services, where we've been seeing some, you know, had some good focus on the services side. So that's things like Telco commission and installation services have been positive and helped support margin. The other thing is good growth in whites and especially small appliances, which are, you know, a higher margin. We're seeing some good growth come through in the JB business, again, helping to support the margin. As far as promotional activity, you know, it feels like we're back to where we were in pre-COVID.
It just feels like, you know, suppliers are, you know, promoting as they were and supporting promotions. We're doing our on-floor discounting as we would've been prior. So feels very much like we're now back to, you know, a much more steady type of run rate.
Gotcha. Great. Thank you. And then I guess maybe my second question is just around E&S. Can you talk if there are any brands that are exclusive to E&S in Victoria, and, and how to think about interstate expansion? And I guess more generally, you know, your, your acquisition track record has been sort of started a little slow with The Good Guys, but then sort of really, you know, was very much match fit, match fit leading into COVID and did very well. Just how you're thinking about, going, you know, managing the E&S business and, and even, gosh, how it will be, disclosed, a separate division or part of, of The Good Guys, maybe? Or just a few questions on E&S, please.
Yeah, yeah. Look, it will be disclosed separately, so you'll, you'll get to see that separately. As far as brands that are exclusive, really the only one that is is gonna be something real premium brand, like a Sub-Zero Wolf is would be exclusive and Victoria only. Albeit, you know, potentially South Australia, it we could have it there. But all the other brands that are, you know, we can have in interstate, but still to be discussed with suppliers. So I don't want to jump the gun too much as far as that's concerned.
No, yeah. Sorry, go on.
Go on.
Sorry, Terry.
No, no, go on.
Any ACCC issues? Or do-
Uh, no
... you guys need to engage with them at all?
No, we have engaged. We have engaged-
Well, you have ... with the ACCC, and we've got,
We've got what they call informal merger there, Shaun.
Understood. Okay.
Yeah. Yep.
... That's great. Thank you, Terry. Thanks, Nick.
Your next question comes from Michael Simotas with Jefferies. Please go ahead.
Good, good morning, and well done on the result. A question on the July trading update. I know COVID's a long time ago, so our memories are probably fading a little bit, but there seemed to be a lot more promotional activity in the market in the month of July than what I can remember. So just interested in any comments on whether there was, in fact, a bit more promotion this July than there has been in the past, and, you know, whether that was funded by JB or suppliers?
I'm not sure there was... Again, it feels like, again, a bit of pre-COVID, just, you know, being, you know, the level of promotions that are, that are there. But look, the reality is, you know, when it's tough, that's what you do. You go out and you promote. And, you know, it has been reasonably tough in the market, so, the team sit down and work with suppliers on creating promotions that can actually drive sales and, you know, drive a result, and that's what's happened. But to say that it's, you know, it's too much different than pre-COVID, I don't think so. It's just the same as any month. When it's tough, you go out, you work with suppliers, you know, and create promotions that are gonna drive sales.
Okay. No, that, that helps. Thank you. And then a question on E&S. Just, just sort of trying to work out how that business is faring cyclically, relative to your other businesses, which have proven to be, you know, pretty resilient. If we look at the EBITDA margins, of that business now versus where they were before COVID, appreciating that unlisted accounts can be a bit patchy, it looks like margins are lower. So just want to get an understanding for where earnings are in its cycle, and do you feel like you're buying this business on earnings that may be, a little bit depressed?
Like, to your point, I think it's a private business again, so it's always a bit hard to look at what is in a historically been a private business. It's always a bit hard to look at what's been in a set of accounts.
Yep.
Yeah, we've no doubt this business... Yeah, the reason we want to own this business, it has exposure to, it's a construction customer, it's a commercial customer, and probably a bit more of a housing exposure with renovations and new starts than Good Guys has. And so it definitely would be feeling that at the moment. We're very comfortable with the earnings that we reported in the presentation there, and that, you know, that they can be the base that we build off, and we grow from there.
All right. Good. Thank you.
Next question comes from Bryan Raymond with J.P. Morgan. Please go ahead.
Good morning. Great result. Just wanting to sort of talk more broadly about the margin profile. We've been talking a lot today about profitability and but particularly around promotional activity and other factors largely normalized now. Your margins are a fair way ahead of pre-COVID as it stands in FY 2024, which was a reasonably challenging year for the consumer. 2025's looking probably a little better from a macro perspective, with tax cuts and rate cuts and so on. Should we be thinking about anything that would we need to normalize in the FY 2024 margins at 7.4 and 5.9 for JB's Australian Good Guys, when we're thinking about that go-forward margin? Because as I said, they are a fair way above pre-COVID.
Is there anything in there that we should be unwinding, or should that be kind of the new baseline as such for the business, when we're thinking about our forecast going forward? Thanks.
I think if you, again, separate the brands when you compare them back to FY 2019, like, you know, when The Good Guys back in FY 2019 was running 3.5% EBIT margins, we were at that point in time, we were definitely looking for significant improvement in EBIT margins, and, and obviously, we've seen that over the last few years. In terms of ours of what we're seeing in... It's, it's not like it's- To Terry's point, the- so we've got the labor back in the stores is, is kind of where we expect it to be. Those gross margins, i- if take JB's Australia, we've always said it sort of bounces around the 22% gross margin. So, you know, gross margins are largely where we expected it to be. The cost of doing business is largely where it's expected to be.
Good Guys, I think the team have done a really good job of holding on to the gross margins at, you know, at, at that 23%. So there's probably- that's giving us a bit of extra EBIT margin than what we probably originally anticipated in Good Guys back in FY 2019. But overall, Bryan, I'd say it is, you know, it largely is for us about we're back to a normal environment, and our job is to continue to make sure we, we maximize the opportunity from here.
That's really helpful. Thanks, Nick. Just on JB's Australia at 7.4, I think pre-COVID was more mid-6s, is that a similar comment there? Like, it seems like it's more of an efficiency game in the CODB line, given, as you said, you're at 20, low 22s on the gross margin. Is that in-store efficiencies or supply chain? Is there anything in there that's meaningfully more efficient than it was 5 years ago?
Oh, definitely that sales, well, to your point, around that sales dollars, like, there's definitely a little bit of leverage that's coming through on the, on the sales dollars. And look, it's... I don't know. I don't have it in front of me, but it's not that material, but that FY 2019 number has also got a bit of pre-AASB 16 impact in it. So it's not. From our perspective, the FY 2024 and FY 2019 are not that materially different.
... Okay, great. And just final one for me is just on the balance sheet. You've obviously given us a capital return, as well as there's an acquisition in there. Your starting point's a bit higher than I thought in terms of net cash at AUD 300. There might be some temporary factors in there, so keen to understand if there's anything we should be unwinding, in particular around timing. But just more broadly, you know, you're gonna be in a pretty strong net cash position going forward, I would think, given those two other factors. Should capital management continue to be on the agenda, do you think, for the market, given do you need a really big net cash position? I guess, where I'm heading with this, like, what's the right level going forward? Thanks.
Yeah, I think, in two comments, I think you probably, you know, you only get to see cash position at two points in a year, being June and December. For what it's worth, they are both the seasonal high points. So it's not that high throughout the year. I think what you're seeing from us today is we are, you know, we're pretty proactive in knowing if we don't have a use for the capital, then we will return it. Ideally, we'd like to be investing in our business or businesses like E&S and continuing to grow top line and grow earnings. But in the event we don't, we will consider it each period.
Just reverting back to the 300, it is a bit higher than, and just specifically on June, it is a bit higher than normal. I tried to call it out with the working capital. It's, you know, we, we bought late, so there's a, there's a, you know, bit of an elevated payroll position. And inventory, even though we put inventory in, we, we still would like to close on a higher inventory number. We still, we still feel like, we've got stock availability challenges because we're trying to, you know, you remember these, again, these... Our two reporting periods are right at the end of two key promotional periods, so trying to get that inventory balance right, is tough.
And so we still think we'd like to invest a bit more back into inventory, and so there is some working capital to go back into the business at June as well.
Okay, great. Thanks.
The next question comes from David Errington with Bank of America. Please go ahead.
Good morning, Terry. Good morning, Nick. If I may dig a bit deeper into the very strong sales growth in that Q4 , and particularly into July, I mean, that's what surprised me today. Most of our macro guys have been telling me, most of our macro guys are telling me how soft that period was, yet you guys seem to be doing extremely well. Can you go into a little bit of detail, a bit more detail, what categories was really in that strong? What's driving that? Is it category growth or is it market share growth? And the second part of the question is: What categories are there that you have, but...
I'm assuming it's probably, I'm probably going more in telephones and, you know, mobiles, but what areas do you think that you're still underserved that are growing strongly, but you still think there's a lot of runway in terms of market share growth? Could you answer that, please? 'Cause that, that's the thing that surprised me, is the strength in your Q4 sales, and particularly leading into July. You seem to be doing a lot better than what I was thinking you'd be doing, given the current macro environment.
Yeah, look, I mean, it's different between the two brands, definitely. You know, JB, you know, just continues to, and we would anticipate we're gaining share, but it's very hard for us. At the end of the day, you know, I don't wanna be flippant about whether we're getting share or whether the category is growing, you know. But, you know, if a customer is out there shopping, we're just doing whatever it takes to actually get that customer to shop with us. I mean, that's just how we operate. It doesn't matter how many customers are out there, we just want them shopping with us. But when you think of JB, those tech categories continue to perform really well.
Things like TV was quite soft, but the tech categories continue to perform strongly. And again, that just comes down to, I think, the fact of how, you know, when we talk about this, a lot less discretionary, those categories are becoming, like, like mobile phone, et cetera. So JB was really tech, and also we saw some really good growth coming out of some categories, like small appliances, which in JB includes vacuum, and you've got small appliances growing really strongly and areas like vacuum, believe it or not, really growing strongly with Dyson and, you know, coming out with a bit of Godfreys, I guess, closing there. If you then come over to the Good Guys, they saw some really good strength in the home appliance categories.
I would anticipate in that case, while they operate the same, whoever's out there buying, we just want to get them shopping with us, that would've been some market share gains in those categories, definitely. And I think, you know, for the Good Guys and for JB, you know, when you think of the market as it is today, you know, consumers are very conscious of price. They want value, and, you know, over so many years, that's what the brands have built in consumers' minds, and no doubt we're benefiting from that during these tougher times.
What about the runway, Terry? Which categories do you think you got more runway? And is artificial intelligence starting to kick in, that you see that you could gain even further runway?
... Yeah, look, definitely the AI-enabled devices are going to give us some runway in that respect, and they're probably playing out like as we anticipated, and that's coming through more in the strength of the ASP they are delivering to that computer category. But come mid-year, you're gonna see some more brands or some of the silicon players come out, like Intel and AMD, are gonna be launching silicon for that is capable of the AI, and you'll see models, model numbers increase, availability of models increase, to something like around 40 models.
So, and also, while still premium, you will see pricing come down a little bit in that, down to more like the fourteen hundred dollar mark or starting at AUD 1,400, so still premium, but just becoming more affordable, and just a greater range of models coming in. So we would anticipate that that will be positive for that category in computers. Telco, we still maintain that we have low share, albeit that share's held with the carriers, so we still feel there's some opportunity to continue to continue to gain some, you know, some share there. And then over in The Good Guys, it remains, you know, smaller clients as it remains vacuum, and just continuing to see if we can grow the share in laundry and refrigeration.
Okay, thanks, Terry. And Nick, just a very quick second question, 'cause I—you're gonna get this for the next 2-3 years, so a bit of a forewarning, but the margin in E&S, I mean, if you look at the EBIT margin, it's pretty low. It's probably at 1% or 2%. So how are you gonna handle that question when it comes at you, every question about the margin being really low? And is there any quick wins that you might be able to get that's gonna happily satisfy us going forward that the margin's gonna improve? 'Cause I can see it coming in the next 2-3 years, you're gonna get hit about that low margin.
Yeah, I get it. I get the, it is lower than the existing businesses, and Good Guys was lower than where it is today as well. So I don't have an easy answer for you. We think it's a good opportunity to grow it, and I'll answer the question for the next couple of years.
And, and, and, uh-
It's coming your way, It's coming your way, Nick. So is there any quick wins that you can get it up a little bit? Because it's coming, you know that, don't you?
We just need to get in there, David, and then-
Yeah.
Once we get in there, we'll definitely, if there's quick wins to be had, we'll find them.
Yeah.
I'm sure you'll do your best.
Also, it's a category in the commercial space, which, you know, would generally be a little bit lower margin, but we're really keen on growing that. So we'll get in there and really understand this business and see what we can do.
Thanks, Terry. Thanks, Nick.
The next question comes from Adrian Lemme with Citi. Please go ahead.
Good morning, Terry and Nick. I just want to say congratulations on the job that your team, you and your team are doing, right, which is evidenced again in today's result. The first question I had, sorry, I know there's been a lot of questions on gross margins in JB Hi-Fi Australia. I mean, we detected a lot less perks deals, those store-wide deals in the H2 on the PCP. So I'm just wondering if that, yeah, directionally was in line with what you've seen, and also, I assume that you haven't had to do as many of those in the Q4 'cause you've had such a strong Tax Time. If you can just talk to how significant that is, please.
It's not. Look, the perks deals are having a significant influence on gross margin. Like, it's. When we're doing perks deals, generally, it's about customer acquisition and building that perks membership base. It's not significantly impacting the overall gross margin, I suppose, Adrian. In terms of Q4, it is just Q4 is an important quarter for us, like, it is end of financial year sales and Mother's Day in May. So it is, it's a big period generally, and it's sort of, you know, we can clearly see customers are lining up behind those promotional periods and waiting for those promotional periods. And so we're just, as Terry called out with that retail execution piece, we're just making sure we execute on those promotions really well.
Okay, great. And second question was on E&S. So I can see it's got nine stores in Victoria. Something like a Winning Appliances has 17 nationwide. Is that a good guide? Obviously, you're not going to give the proper guidance today on it, but is that something you could work towards over the next few years? And secondly, you know, is there any material overlap in the brands that E&S has with Good Guys? Is there then some benefits from harmonizing trading terms, please?
Look, store expansion, yeah, again, we need to do a lot more work on store expansion, but it remains a, you know, really good opportunity. When you think of the number of stores just in Victoria, it indicates that potentially there's greater opportunity than, you know, what you're seeing there from Winnings. And as you know, Winnings, while it is around the country, is really focused in New South Wales.
Mm.
So, yeah, we see really good expansion opportunities. Numbers, you know, hopefully, we can be a bit more, we can be clearer over, you know, the, in the, in the future on, on how we're seeing that play out other than we know that there is a good opportunity. Brands that overlap? Yeah, a lot, a lot of brands do overlap between The Good Guys and E&S. Obviously, the E&S products from those brands is more in the premium space, and The Good Guys is probably more entry to mid.
But, you know, they're hopefully, and again, we need to get in and understand this, but, that will be one of the things, like we did with The Good Guys and JB, is we would look to try and leverage that with suppliers to see if we can improve margin and, and those opportunities.
Great. That's very helpful. Thanks, guys.
Your next question comes from Ben Gilbert with Jarden. Please go ahead.
Hi, guys. Just on the Telco category, just interested in, I know you don't give explicit splits by category because the software, but just any color on how material it contributed to the category that was, and the ability to sort of maintain that momentum. 'Cause there's some numbers floating around for the March and June quarter, showing that Telco was up sort of mid-20s across the industry, and then up, like, 30s in the June quarter, which given, I think, its biggest category in JB's now would mean it was quite a significant contributor. But Rob's got a lot to come, and Google's pulled theirs forward and got iPhone, all this sort of stuff with AI. Just any color you could give us around that, and again, the runway, you continue to see that?
I think to your point, it's an important category of JB. I think I've seen some of that market data that you're talking about. We're definitely not seeing that level of growth in our business, but it is still a strong contributor to the overall JB Hi-Fi Australia growth.
How much, I suppose, how much scope this year to Eric's question before, is there? Because you've obviously done such a good job building that and generating or driving new customer cohort for Telstra. Do you still see significant runway, or are you coming up against more competition now? Do you think you've been helped a lot by Apple supporting, providing more support in the market as well?
I'll just have a say on the, you know, on the hardware side. So separating out the Telstra, the Telstra piece, on the hardware side, you know, we still have, you know, some strong ambitions to continue to really grow that category and think we have opportunity, and we know we have opportunity to grow it. So we still see upside there. And I think you made also the point around things like AI. You know, that's- it'll be interesting to see how that plays out in the Telco space. I know it's in Samsung, but Apple is still yet to launch, and they've started talking about their Apple Intelligence, they're calling it, but that will be...
There's not much detail on that, and that will come out, and if that can really, and Apple generally do a really good job of demonstrating good use cases for that, then, you know, that, that could be a, that could be a really good one for, for new product launches from them to drive an early replacement cycle. So there's potential in there. We've just got to see how that plays out. But, you know, we still remain that, that we've got some, some really good growth opportunities in Telco, the hardware side.
That's great. Thanks. Just final one from me. Just one quick around CODB, sort of talk to Good Guys and JB's together, split them out. But just how are you thinking about the underlying rate of CODB growth into next year? Is the focus still very much around managing wages as a percentage of sales? Think you'd be able to get some operating leverage, for instance, in JB's, if you can maintain this sort of level of comps. Just give some color on how you think about CODB underlying inflation for fiscal 25.
Yeah, look, it is largely the same, Ben. You know, the biggest part of our cost base is the wages, and so, as we've always done, we will try and manage that wage cost in line with our sales, our sales growth. So the easiest way to do that is to grow top-line sales, and we remain very focused on growing that top-line sales base. And then obviously, the inflationary increases will come through in that wage base. You know, thankfully, the award increase from a corporate perspective was less this year than it was last year, so it's a slightly more manageable task, but still not an insignificant increase that we will need to manage.
Some of the other ones, like rent, et cetera, obviously, with double ASP, but the CPI type, CPI plus type rental increases, they continue to flow through?
Yeah, so they'll continue to flow through. To your point, it is, it gets a bit lost with the accounting, but yeah, the CPI pluses will still flow through. And we'll just, again, we just need to try and manage that lease base the best we can as they come up for renewal.
Fantastic. Thanks, guys.
Your next question comes from Lisa Deng with Goldman Sachs. Please go ahead.
Hi, Terry. Hi, Nick. Congratulations on a really good set of results. A couple questions. Firstly, on the promotional calendar, can you talk to us about the promotional calendar for the end of financial year sales compared to last year in terms of, you know, for example, number of days, and you know, I think Nick mentioned some of the later June orders then floated into the July delivery. So can we better understand that? And then, I guess, the flow on from that is the Black Friday, the November sales, like last year, I remember, was significantly larger than the 2023. And so what are we kind of thinking for that promotion period again in November this year? Thanks.
Yeah, so tax time, look, it was very similar to last year in the sense of the, you know, the length of the promotions. You know, nowadays, promotions seem to go for the whole month anyway. You tend to be going for the whole month. So tax time's fairly much the same. Last year, Black Friday did creep out for a few extra days, so instead of the one, you know, the week, it almost stretches out for two. This year, we would anticipate that's gonna be the same. It does get a bit closer, this time into December, Black Friday, this year. So that will be interesting to see if that, some of that flows into December.
We've still got to sit down and work all of that out in the sense of how the sales may flow through. But we anticipate Black Friday this year to be bigger again. I mean, it just seems to be getting bigger. Consumers absolutely understand what it is, and then throw on top just that people are really looking for value. We anticipate that Black Friday will be another good period for us this year.
Yeah. And just on July, we noticed that Prime Day this year was, like, six days compared to last year. Did we extend any further sort of promotions into July that we normally wouldn't have or didn't do last year?
No, no. So it's always, it's actually a good thing, you know, when others are promoting. You know, JB-
Yeah
... and The Good Guys, for that matter, actually benefit during that time. And you can argue, is it tough on margin, et cetera, but at the end of the day, all we care about is taking the sale. So-
Yeah
... you know, Prime, you're right, it went for six days. The JB team just got right behind it. We're matching price. We're actually out there actively promoting and pushing deals as well, and they just took advantage of the hype that was around it, and it was a, you know, really good result for them, and they, you know, credit to them, did a really good job, and as did The Good Guys. The Good Guys are, you know, a good result out of it, too. And again, I just keep coming back to this fact that consumers expect both JB and The Good Guys.
There's a lot of trust around the price, and they just anticipate if there's a sale in the market from anybody, that we're going to be, you know, bringing it to the market as well or, or, you know, having our own deals running at the same time. So we always get customers at least checking us for price and shopping-
Yeah
... us as well during those times.
Great, and just one last one from me. In terms of, like, supplier funded promotions, we've heard from a lot of places that Apple's been very promotional, trying to sort of clear the, call it, iPhone 14, 15s in to create runway for the Apple Intelligence-enabled, like, 16. Do we have, like, a firm date for them launching? And do we have any sort of exclusivity, not just for Apple, but around some of those AI product lines that you mentioned, to get that opportunity ahead of other people?
So firstly, on Apple, no, we don't have any dates as yet, other than, you know, September, as you mentioned, as a potential. So we don't have any opportunity. Apple have been very promotional. We've seen that over the past 12 months, and that's all part of that margin that you're looking at there today. So-
Yeah
... that is Apple being promotional. So that's about Apple. As far as AI getting exclusivity, not necessarily getting exclusivity, it's just that, you know, when it comes to JB, again, they're known as first to new. And what we have seen with the current AI devices that are actually in the market, is JB has picked up the lion's share of those sales based on the fact that, again, consumers just first thing they think about is JB when they think of these new devices. They're coming in, our staff are trained. Again, the team did a great job of running a training program for all staff around the country just prior to the AI devices coming in. So consumers were walking in expecting to see it and then actually, you know, getting great service from the team. So-
Yeah
... we'll continue to do that as this new, as the new silicon, rolls out, which is sort of mid-year.
Got it. Thank you.
The next question comes from Craig Woolford with MST Marquee. Please go ahead.
Morning, Terry and Nick. Two questions. I'll keep it brief, given we're on time. Firstly, just what's been the progression of, I guess, average selling price or average transaction value as you moved through FY24? It was a great H2 result. Was that more about more transactions coming through, or is ASP and mix being a more positive influence?
When you think of an average transaction in tech, or for JB, it was actually slightly up, and volume was slightly down. So it's not too dramatic, but ASP has held up, and that's more to do with the mix of the products that are going through than the individual categories. Categories like computer and Telco have held up. Others might be slightly lower, but the average that a consumer is buying from us is just slightly up. It's reversed in The Good Guys, and that is that volume was up, ASP was down. And that's, again, that real flight to value that consumers are doing with white goods. But the volume was up, again, with I would just say, that trust, that coming to The Good Guys are gonna get the right price.
That's how we saw it play out.
Yeah. So just to clarify on Good Guys, that'd be trading down to a potentially cheaper brand or a lower spec model or something like that?
Yes. Yeah, yeah. It's, it's more the value brands or value models-
Yeah
- that are on the floor.
Okay, and because everyone's asking on gross margin, I feel like I've got one on the JB Hi-Fi Australia, specifically. The H1 gross margin was 22.0, and the H2 was 22.45. I know it's might be small in the scheme of things in your world, but it is a meaningful enough difference that just want to know whether you feel we should be extrapolating 22.0 or 22.45, because they could give quite a different result for FY 2025.
There's a bit like I know I try not to sound like we flip it, but there, it, it does move with mix, Craig, and so it is, you know, it's a, it's a little bit. You know, for example, [inaudible] TV sales were a bit tougher in the H1 than they were in the H2 . TV sort of nature of the product means it's higher gross margin, so that's helpful in the H2. So it, it moves around with mix. We, you know, we're pretty comfortable as we're talking around, around sort of that 22, and it is going to bump up and, you know, move around depending on the period.
So do you think the mix effects that you saw in the H2 is representative? Because some of the commentary early in this call seemed to suggest that, you know, all the other dimensions of mix have, have largely normalized, and perhaps the H2 is more representative.
Yeah, 22.45 is a bit higher than what it's historically run at.
Yeah.
We're probably more comfortable closer to 22.
Thanks, Nick. Thanks, Terry.
Your next question comes from Phil Kimber with E&P Financial Group. Please go ahead.
Guys, just a question. Obviously, June, or the Q4 in July were very strong. I mean, are you seeing, you know, material change in consumer behavior? I guess I'm trying to understand, is this sort of the Black Friday experience all over again, where, consumers come out for key promotional categories and then, you know, sort of went back into their shell a little bit afterwards? Or is this, you know, do you are you seeing sort of a fundamental change in the consumer, and this is the start of, you know, a more buoyant period? I just wasn't sure if you've got any insights on that from what you can see.
You know, no doubt we're cycling, though some lower comps from the year before, I think is you know, assisting us as far as that is concerned. So there's no doubt, though, that you know, we had a really solid Tax Time promotional period. Again, consumers are really reacting to that discounting. However, that last quarter into July, you know, we're just cycling less challenging comps as well.
Yeah. And just the second one, and it's a small point. You've given pre-AASB EBITDA for E&S in FY 2024 of AUD 7 million. Is, you know, what, can you give us a sense, because you're going to report a post-AASB basis, you know, what that number would be? I mean, would it be, you know, is there 2 million or 3 million of D&A and, you know, maybe a little bit of interest on the leases? Or do you sort of come down to that 4 million -5 million sort of range?
We appreciate we haven't given all the color today. I would say it's only small overall in the context of the group, but you're right, like there'll be a fair bit of D&A and interest that has to come out of that number as well.
Okay, yeah, I know it's a small number, but just wanted to get a sense. You, you're going to report it separately for the sake of it?
Yeah, we'll report it as a separate segment. Like we said, it'll, you know, Rob will run that business as Managing Director, and it'll sit alongside JB and Good Guys.
Can I ask on the way you're reporting it, the 75%, I assume you're going to report 100% of the earnings, and then there'll be a put or a put and call option on the balance sheet side that moves up and down. Is that the way it'll be reported?
Need to finalize how we account for the put and call. To your point, you probably have to recognize 100% and then have a non-controlling interest for the remaining 25%.
Okay, cool. Thanks, guys.
The next question comes from Mark Wade with CLSA. Please go ahead.
Thank you, and well done on the result. Just on these, these legal proceedings that are afoot, is it just a bit of a case of a bit of bad luck to have two in a row there, or do you think there's something more, deeper going on governance-wise, or maybe being a bit too aggressive on things that's led to that, situation?
Just bad luck.
Okay. Has it changed the practices in the businesses today?
You know, we've got a really strong compliance program in here, but it doesn't—of course, it makes you just review and just make sure that you're comfortable with it. But, you know, we hold ourselves to a pretty high, I'll say, very high account internally. But, you know, it doesn't stop you from just going back and revisiting and just being really sure that you've that your compliance is up to scratch. And again, we feel it is, but we just remind ourselves.
Okay. And just to clarify, you would have incurred some costs to date, that you've just expensed that, and there's no provision taken more generally for any future costs, right?
Yeah, that's correct. Yeah.
Okay. All right. Thanks, guys.
... The next question comes from Ross Curran with Macquarie. Please go ahead.
Hi, Tim. I realize most things have probably been covered off on that, but just maybe on New Zealand, you know, you've committed to opening another 5 stores this year, that the business is still sort of hovering around break-even there. Is it progressing to plan the store rollouts? When can we expect that business to start, you know, contributing to the overall group?
Yeah, look, it's, you know, obviously, we'd like to have seen the gross margin come up a bit stronger, but that's as much a function of just how tough it is in New Zealand and being competitive. Yeah, we're seeing good sales growth. So, you know, I've got to say, getting comp growth out of that business has been really pleasing. You know, you'll know well how others are performing over there, and to get that comp is really good. Now, it's all about leveraging those sales. It's all about working with suppliers, putting in stretch rebates, doing deals, leveraging the volume we've got, and growing the gross margin in that business, and then we'll start seeing some improvement.
And then just a point of clarification around E&S. Do you need to put any more capital in just in terms of rebuilding inventory or anything like that into the business?
It will require some capital investment. Yes. So it is, you know, it will require some inventory that will be, you know, Terry talked about, we're looking to grow the business. So, there'll be some capital investment from a CapEx perspective as well.
Okay, thank you.
The next question is a follow-up question from Michael Simotas with Jefferies. Please go ahead.
Thanks, thanks very much for taking another one. I just wanted to clarify something. It looks like your software sales in JB Hi-Fi Australia were abnormally low in the H2. I think it fell a bit below 3% of sales and fell 30% year-on-year. Just want to check, firstly, is that just rounding, messing up that math? And also, is that the run rate going forward, or was there something unusual that happened in that half? Just thinking about implications for gross margin.
I'm just trying to recall, but, I would put it down if it... I must admit, we haven't looked in great detail, but it would be software releases. I know gaming-
It'd be gaming.
Gaming, we weren't cycling some software releases from the previous year, and we knew that was going to have an impact on the category, and obviously, that's what you're seeing, and you're seeing that play out.
Yeah, because it just, it just makes that H2 gross margin seem even stronger in that context, I suppose.
Yeah, I think you've got to remember, the gaming software released last year, so it's not particularly good gross margin. So-
Yeah.
It's one particular game, and so that gaming, that gaming category was down by 50% in Q4 as a result of not cycling that title the year before.
Yep. All right. No, that's helpful. Thank you.
Thank you. There are no further questions at this time. I'll hand the conference back for closing remarks.
Well, thank you. Thanks, everyone, for your time today. Really appreciate it, and no doubt we'll be seeing some of you out on the road. Thank you very much.