Into the new product segments of premium appliances and bathroom , along with targeting a new customer base of renovators, architects, boutique-involving builders, and large commercial construction customers. Moving down to our value proposition, we remain focused on this value proposition of being known and trusted for value, driven by a strategy of best brands, big range, and low prices. Further down, our passionate and knowledgeable team members will remain focused on delivering exceptional customer service. Of course, all of this is supported by our key competitive advantages, which I'll cover on the next page. Over to page five. Again, you'll be familiar with these, just a few key reminders. Firstly, scale and now updated to include diversification.
You understand our scale and its benefits as described, but also with our multi-brand retail operations strategy and diverse categories comes the benefits of category and brand diversification, which means it helps to reduce the reliance on any single category or brand performance. Secondly, our low-cost operating model ensures we can deliver ongoing customer value. It gives us agility and resilience by ensuring we can respond to market price activity and maintain focus on market share, and also compete effectively with traditional competitors and new market entrants. Finally, the benefits of operating leverage with a group function, enabling us to drive efficiencies across a large cost base. Thirdly, multi-channel. Multi-channel is just maximizing our customer reach and sales through a wide range of sales channels.
A significant benefit of multi-channel retailing is our store base or store network, which provides confidence with after-sales support regardless of the sales channel used when buying. Lastly, but importantly, people and culture. This is such a key drive for the business in delivering best customer experience for our knowledgeable and passionate teams. Having a dynamic and flexible environment allows the business to pivot quickly and adapt to any changing market conditions. Talent retention. Highly engaged teams who have a connection with our brands and their purpose. Diverse and inclusive workforce and an unrelenting focus on health and safety. Over to page six. Today, we released our 2025 sustainability report outlining our commitment to having a positive impact on our people, our community, and our environment.
As set out in the report, we are committed to, for the people, that is the health, safety, and wellbeing of our people by creating and maintaining a safe and healthy workplace, and fostering diversity and inclusion, gender equality, non-discrimination, and equal opportunities across our workforce. With our communities, it's making a positive impact in our communities in which our team members live and work, and working with our supply partners to protect and further human rights. For our environment, a commitment to net zero direct carbon emissions by 2030 and proactively reducing our waste consumption and improving sustainability of all packaging. Over now to page eight and the group performance. We'll talk through this in more detail as we move through the presentation. It was another strong year of sales and earnings in FY 2025 as we built on the momentum of the previous year.
The table details our statutory results. For clarity, we have included in the footnotes our normalised group performance, excluding the one-off $13.7 million expense in relation to the resolution of the ACCC proceedings against The Good Guys. Excluding this one-off, EBIT was up 9.4% to $707.8 million, NPAT was up 8.5% to $476.1 million, and EPS was up 8.5% to $ 435.5 per share. In addition to the FY 2025 results, the board today declared a special dividend of $1.00 per share fully franked , or $109.3 million. Together with the final dividend, we'll distribute $224 million to shareholders. Also announced an increase in the dividend payout ratio from 65% to a range of 70%- 80% of NPAT from FY 2026. Also announced that I will retire from the group on the 3rd of October and be succeeded by Nick Wells.
Over now, turning to page nine, I'll take this as read as we'll cover off the individual brand results in the coming pages. Now, 10, the divisional performance, starting with JB Hi-Fi Australia. Again, I'll take the summary pages as read as we'll cover in greater detail on the next pages. So now to page 11. JB Hi-Fi Australia FY 2025 sales results. The total sales increased by 7.5% to $7.1 billion, with comparable sales up 7.2%, driven by continued customer demand, new product releases, and well-executed promotional activity. The key growth categories are mobile phones, small appliances, computers, games hardware, and as we have noted, for games hardware, particularly in Q4, with the launch of the Nintendo Switch 2. Software sales were 2.9% of total sales, and online sales increased by 16.4% to $1.9 billion, or 16.8% of total sales.
FY 2025 earnings, gross profit increased by 6.4% to $156 billion, with gross margin down 21 basis points to 22%, driven by sales mix and ongoing competitive activity. Cost of doing business was 12.4%, down 19 basis points, and in absolute terms grew 5.8% with disciplined cost control throughout the year. Depreciation increased by 4.9% with an increase in both depreciation on right of use assets and depreciation on fixed assets. EBIT increased by 8% to $530.3 million, with EBIT margin up 3 basis points to 7.5%. Over the page to page 12 and JB Hi-Fi New Zealand performance. Again, as per JB Hi-Fi Australia, I'll take this summary pages read as we'll cover in the following page. Page 13. JB Hi-Fi New Zealand FY 2025 sales, total sales increased by 20.8% to NZD 396.3 million, with comparable sales up 9.2%.
The key growth categories were mobile phones, computers, audio, and small appliances. Software sales were 4.8% of total sales. Online increased by 48.1% to NZD 63 million, or 15.9% of total sales. FY 2025 earnings, gross profit increased by 21.3% to NZD 67.3 million, with gross margin up 6 basis points to 17%. Cost of doing business was 14.7%, down 86 basis points, and in absolute terms grew 14.1% with disciplined cost control throughout the year and continued investment in new stores and strategic initiatives. EBITDA was NZD 9 million, up 104.3%. EBIT was - NZD 0.2 million, up to NZD 2 million. Now turning to page 14, The Good Guys. I'll take the summary pages read as we will go through more detail in the following page. Over to page 15. FY 2025 sales for The Good Guys.
For The Good Guys, total sales increased 6.9% to $2.87 billion, with comparable sales up 6.5%. The key growth categories were floor care, portable appliances, cooking, and computers. Online sales increased by 9.9% to $425.4 million, or 14.8% of total sales. FY 2025 earnings for The Good Guys, gross profit increased by 8.2% to $672.4 million, with gross margin up 28 basis points to 23.5%, driven by continued strong execution by the team. Cost of doing business was 14.6%, up 65 basis points, and in absolute terms grew 11.9%. Underlying cost of doing business, that is excluding the one-off expense as to the footnote and we previously explained, was 14.2%, up 17 basis points, and in absolute terms grew 8.2% with the investment in store wages to support increased store traffic. Depreciation increased by 5.5% with an increase in both depreciation on right of use assets and depreciation on fixed assets.
Statutory EBIT increased 1.1% to $159.8 million, with EBIT margin down 32 basis points to 5.6%. However, underlying EBIT was up 9.7% to $173.5 million, with underlying EBIT margin up 15 basis points to 6.1%. A solid result for The Good Guys. Now over to page 16. e&s. As you're aware, on the 2nd of September 2024, the group completed the acquisition of 75% of e&s. Results are presented for that period of ownership. FY 2025 sales, total sales were up 5.2% to $225.2 million, with comparable sales up 4.2%. Sales growth was primarily driven by the commercial division. FY 2025 earnings, EBIT was $4.2 million, in line with the group's expectation with EBIT margin up 1.9%. I'll now hand over to Dave just to talk through balance sheet and cash flow.
Thanks, Terry. On slide 18, the balance sheet and starting with inventory. Inventory was $1.3 billion, up 18.7% or $204.8 million year on year. Excluding e&s, inventory was up 12.8% or $139.5 million, with a planned increase to inventory to support six additional stores and sales in both Q4 of FY 2025 and Q1 of FY 2026. Inventory turnover was down 27 basis points to 6.7x . Excluding e&s, inventory turnover was 6.9x , down 8 basis points. Payables were up 22.9% or $165.1 million year on year, in line with the increase in inventory. Slide 19 highlights on the cash flow statement. Operating cash flows and operating cash conversion continue to be strong. CapEx was $82.1 million, up 10.4% or $7.7 million year on year, with investments in the store portfolio, online, and strategic initiatives.
Investing cash flows include $47.6 million cash consideration for the purchase of e&s, but less $6.8 million of acquired cash balances. Dividends paid of $385.9 million include the payments of ordinary dividends of $298.4 million and the FY 2024 special dividend of $0.80 per share or $87.5 million that was paid in September of 2024. Net cash was $284.1 million, down $18.5 million, with continued strong cash generation offset by the additional cash outflows for the acquisition of e&s and the payment of the FY 2024 special dividend. On slide 20, capital management. As a result of the group's continued strong financial performance and cash flow generation, the group has an elevated net cash position and a significant franking credit balance.
Taking this into account, the board has today declared a final dividend of $1.05 per share fully franked, up $0.02 per share or 1.9%, bringing the total ordinary dividend to $2.75 per share, up $0.14 per share or 5.4%, and representing 65% of NPAT for FY 2025, and a special dividend of $1.00 per share fully franked. Combined final dividend and special dividend will distribute $224 million to shareholders. The record date for both dividends is the 22nd of August, with payment to be made on the 5th of September. The board reviewed the group's capital structure and today announced an increase to the dividend payout ratio from 65% to a range of 70%- 80% of NPAT from FY 2026.
The capital management initiatives announced today reflect the board's commitment to maximizing return to all shareholders, whilst maintaining an optimal capital structure that provides the group with continued balance sheet capacity to invest in both organic and inorganic opportunities. I'll now hand back to Terry for the July trading update.
Thanks, Dave. Now on to page 22 for the FY 2026 trading update. Sales update for the period 1st of July to 31st of July 2025. Pleasingly, sales momentum continued into July, supported by new product launches and an improved stock position. Total sales for JB Hi-Fi Australia were 6.1%, with comparable sales growth of 5.1%. Total sales growth for JB Hi-Fi New Zealand was 38.4%, with comparable sales growth of 23.7%. Total sales growth for The Good Guys was 4.3%, with comparable sales growth of 3.8%, and total sales growth for e&s was 1%, with comparable sales growth of -2%. Now on to group focus areas on page 24. The group continues to leverage and evolve its unique offer and capabilities, with particular group focus in four areas being retail execution, multi-channel, brand reach, and supply chain.
With retail execution, that's about continuing to prove value, and that's actively promoting and demonstrating the value we offer customers. Keeping it simple, never want to overcomplicate the business, and as such, staying focused on things such as metrics that matter, customer engagement, creating and evolving our engaging in-store experience, and operational efficiencies. Continue to drive efficiencies and reinvest in customer-facing roles. With multi-channel, it's about online, and that's leveraging and maximizing the significant online traffic. Part of that opportunity to leverage the traffic is marketplace, and we'll continue to look to expand the range of marketplace and drive awareness. Membership programs, and that is around delivering personalization at scale and enhanced sales channels. That's creating consistent customer experiences across all channels, but also ensuring we stay connected with shoppers however their shopping journeys may evolve.
Brand reach, that involves store expansion, JB Hi-Fi New Zealand expansion, three new stores in FY 2026, e&s integration and expansion, one new store in FY 2026, JB Hi-Fi Australia, five new stores and one closure in FY 2026. The Good Guys, no new stores, but two major relocations in FY 2026, and the commercial growth, continuing to expand our customer base. Finally, supply chain, which is focused on delivery options, creating best-in-class customer experiences, optimizing inventory flow, enhancing stock availability, especially during those peak trading events, and evolving the supply chain network to align with our multi-channel strategy to improve flow of bulk products. Over now to our investment checklist on page 26. You all know this well by now, so I won't go through it. However, all remain key to our continued ongoing success. We'll now hand over to questions. Thank you.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. Your first question comes from Adrian Lemme with Citi.
Good morning, team, and congrats, Terry, on the result and your very successful second stint as CEO, and congrats to Nick as the new CEO. My first question was about The Good Guys' gross margins. I calculated, if I'm right, that the second half gross margins were up something like 87 basis points. Are you able to give more color on what's driven that significant turnaround? Are you triggering more rebates with the better sales growth? Have you tightened up promotions, etc.?
Adrian, to be honest, there's a bit of lumpiness in the halves and a bit of what we're cycling in the prior year as well. If you look, the second half, 2024, was probably one of the lower gross margins halves we've had in The Good Guys for quite a while, so we're cycling that this year. There is a little bit of benefit in this half from that continued strong growth that we've been seeing in The Good Guys over an extended period of time. It's a bit about the comp and a little bit about some good execution and some good growth in the second half.
Okay, thank you. Can I ask the second question? Obviously, we saw very strong growth in inventory. Should we take that as a sign of your outlook into Black Friday rather than you've got, you know, any excess inventory? If so, what are the key categories that are driving that increase, please?
Yeah, thanks, Adrian. The increase in inventory, I think we've always sort of said that we manage inventory to forward weeks cover, which is, you know, sort of reflects, or part of it then reflects the sales growth that you're seeing in the numbers at the moment. In addition to that, there's probably just some abnormal things there. There's a little bit more new stores in the network, and that obviously drives increased inventory. I think we've called out sort of six or seven there, and there was also a wet skate in New Zealand that opened very early in July that you kind of stock out. That's contributing as well. Finally, within, there's always something happening with suppliers, and at that point, there was an ERP change with one of our suppliers where we bought ahead of what might be disruption to stock flow.
All those things are contributing to sort of what you see growing ahead of the sales growth that you saw in July.
Right, thank you. That's very helpful.
Your next question comes from Shaun Cousins with UBS.
Thanks. Good morning, and Terry, congrats on both your tenure as CEO, and thanks for the engagement in answering our questions over the years, and good luck, Nick, in the new role. Maybe just to start on gross margins in JB Hi-Fi Australia. While it fell as expected, it only fell on our numbers, maybe 27 basis points to sort of 22.18%. Can you discuss the impacts of product mix, supplier support, and in-store discounting? If you could also touch on the broader competitive intensity with Officeworks signaling more vocally their intent to compete in Amazon and traditional peers, Harvey and Bing Lee please.
Yeah, I think, Shaun, we were pretty pleased with that second half gross margin in JB Hi-Fi Australia. The first half, we were down at sort of 22% or even slightly lower, 21.84%, and we were always targeting around that 22% gross margin. To get it back up to 22.18%, I think it was in the second half, was a good result. Mix didn't have a massive material impact in the second half, so that was reasonably helpful. Competitive environment, it's still competitive. We're still seeing some of those competitors you mentioned be pretty aggressive in particular categories and we continue to meet the market on price. We would say that the on-floor discounting or the effective discounting is probably just normalized. It's back to, I think we said previously, it's back to where it was historically, and that's probably in the base now.
We didn't see an increase in that effective discounting in the half.
Great. Maybe just secondly around cost of doing business, that sort of fell pre-D&A down, I think some 31 basis points. Could you just talk a bit about some of the drivers of that across, be it operating leverage, how you've been able to flex or manage labor costs, Fair Work's going up, but in terms of how you've been able to manage your labor better and then how you've been able to manage your rents as well, please?
Yeah, again, I think the team have done a really good job of managing that cost in the second half. I would acknowledge there is definitely some operating leverage benefits there. That's a, I think with almost, well, 7, almost 8% sales growth in the second half, it's definitely helping from a cost of doing business percentage perspective. The operations team absolutely continue to manage labor really closely. From a rental perspective, we've sort of gone through those last couple of years where we do have, you know, in JB Hi-Fi Australia, half of the leases with annual increases tied to CPI. We've had those coming through the last few years. We're probably now back to a level where those annual increases are more manageable. On renewals, you know, we continue to be an important, an important tenant for our landlords.
We continue to, you know, to push for what we think is appropriate rent for what we bring to those sessions.
Fantastic. Thanks, Nick.
Your next question comes from Michael Simotas with Jefferies.
Good morning, everyone. Firstly, I'd just like to echo that congratulations for Terry and Nick. First question I've got is on The Good Guys' CODB. Fairly high rate of growth in costs across both of the halves for The Good Guys. How much of that was discretionary investment that you wanted to put into the business versus investment that you needed to make? How should we think about that going forward? Is there more cost investment ahead of sales that you want to do, or is this the base that we should work off?
I think it's definitely us putting the labor back into the business that we thought is necessary given the sales environment. I don't think we did call that out in previous times that we felt that's gone a bit too tight on wages given the sales increase.
Yeah, looking forward, Michael, we'd say we probably feel like we've gotten the mix right again. You know, the labor to customer ratio feels pretty right now.
Okay. All right. Good. The second one for me, just whether you're seeing any signs of the categories that are more directly driven by housing starting to fire. I mean, e&s, it's still early days, but it's a bit softer, and it might be worth talking about Victoria specifically as well. Some of those sort of premium appliance categories that are more driven by housing, are you starting to see any signs of life?
I think if you think of the, yeah, e&s would be the one that we should see that premium side come through. If you think of The Good Guys, they are, you know, really focused in the replacement in the market. They've been seeing some solid growth coming out of the HA categories. Obviously, that's replacement though, so it doesn't necessarily indicate it's a function of, you know, the housing side of it as yet. I would say we haven't seen too much as yet, but we are hoping that that will start to improve over the coming years.
Okay, thank you very much.
Our next question comes from Tom Kierath with Barrenjoey.
Oh, morning guys, and congrats Terry and Nick. Just one on the fourth quarter comp in JB Hi-Fi Australia. I think you did 8.2%. Is that kind of driven more by Nintendo Switch, like a product-specific launch, or are you actually starting to see now better foot traffic kind of coming back into the stores maybe as the consumer kind of recovers a bit?
Yeah, thanks Tom. It was an elevated comp relative to perhaps the Q3 that you saw running into it. If you think about it, Nintendo Switch 2 launched in Q4, and that did drive a lot of that incrementality. I think that the baseline of Q3 and perhaps what you're seeing with July is probably more like what you'd expect, excluding the launch of Nintendo Switch 2.
Got it. Secondly, obviously with the stuff that's going on in China and the U.S. with tariffs, how are the kind of discussions going with suppliers at the moment? You know, might we start to see some deflation here if you can negotiate better terms or that your suppliers can negotiate better terms out of China? What's the latest on that front?
Look, suppliers, you know, it seems to change every day. Even suppliers are just struggling to actually keep up with, you know, what it may mean for them. Generally, when they are looking at the U.S., it's the different manufacturing plants. We're not getting any feedback that we're going to see any benefits or conversely any negative impacts coming to us at this stage.
Okay, great. Thanks, guys.
Your next question comes from Josephine Forde with Bank of America.
Good morning, everyone. My question's also on the fourth quarter sales was really strong. I'm just curious, do you see a solid runway for new product launches coming into market in FY 2026?
Yeah, look, the great thing about the business is there is always those product launches, and the likes of Apple will launch. We don't know. We're not giving any detail, but it's fairly regular. There is some what we're anticipating to be reasonable launches, but really, it's just more of the same that we see every year and coming through.
Yeah, it feels like the pace of innovation is really stepping up, and we're sort of at the beginning of rapid advancement in AI technologies. Perhaps my second question, I'm just interested in commercial growth. Can you expand on the opportunity in commercial for JB Hi-Fi Australia and The Good Guys? We know your competitor has launched its business platform in Australia a few months back. I'm just interested in the progress you guys have made to date growing government and corporate customers across those businesses, please.
Yeah, I think when you look at commercial, it's probably important to divide it into the different brands. In JB, we have JB Hi-Fi Business and JB Hi-Fi Education. JB Hi-Fi Business, we've done a lot of work on sort of repositioning that business, getting it very clear on its customer proposition, and that's probably very focused on SMB and trying to grow the customer base. We've made some investment in systems and people and processes to do that and feel like that's well set up now for growth. Education, we still think, talk about tech and category growth, we still think technology and education will be a good opportunity for JB Hi-Fi, so that'll continue to grow. Similar to JB, The Good Guys have a commercial business which is probably that SMB type customer as well.
Where we had a gap in commercial was really in that developer and commercial construction customer market, and that is where e&s are very strong. That was a big part of the reason for the acquisition of e&s, to access that new customer in that commercial segment. We think there's good opportunity to grow in that commercial construction market with e&s.
Okay, have you seen good customer acquisition in the full year to date in those commercial customers?
Look, in our commercial business, we had a reasonably soft couple of years in commercial. I'd like to see, Terry was saying, I'd like to think that we'd start to see that improve over the next 12 months.
Okay, thanks. Thanks very much, guys.
Your next question comes from Caleb Wheatley with Macquarie.
Morning, Terry and team, and congratulations again, Terry and Nick. My first question, just going back to JB, I appreciate your comments on the benefit that Switch 2 had, but I think you've also been talking to some of the benefits maybe to come from the COVID replacement cycle and Windows 11 laptops. Have you started to see any of that benefit roll through as yet, or are we still likely to see it through FY 2026, please?
Look, when you, I think it was a bit hard to hear there, but the AI-enabled PCs type categories have continued to perform well for the business. Obviously, it's a really strong category for us, but we believe that COVID replacement cycle has to be starting to flow through, but it still feels like there's more to come with that into the next financial year.
Great, that's clear. Thank you. My second question, just on the FY 2026 focus areas, you've called out supply chain there as well. Just keen to hear how you're seeing the opportunities on that supply chain and if it ties into the earlier question on commercial. Is it a response to sort of step up given the growth in online? Could you just provide a bit more color on the thoughts around the supply chain focus, please?
Yeah, what we have been doing and continue to do is try and make our supply chain as efficient as possible and adjust to the changes in the business. I think we've done a really good job on that outbound customer delivery, so that last mile fulfillment to customer, we're doing a good job. Where we have a bit more of a challenge at the moment is we've seen significant growth in bulky goods over a number of years. If you think we have what we call our HDCs, they are our big and bulky home delivery centers. Since we put those in place post the acquisition of The Good Guys, I think back in 2017, 2018, we've had significant growth in the business.
We just have some space challenges in those HDCs, and we need to do some work around how we evolve those HDCs to manage that increased volume. We're doing that work at the moment. Similarly, as to then how we flow some of those sort of semi-bulky products into our stores, and that's items like robotic vacuum cleaners and coffee machines and microwaves. It's more a continued evolution of what we've been doing over the last few years, Caleb.
Great, thank you, and congratulations again.
Your next question comes from Ben Gilbert with Jarden.
[Morning team ]. I'm just interested in terms of looking forward. It feels like commercial, which I think historically has been well over sort of half a billion. You've got Nintendo Switch 2 coming, you've got Switch coming through, et cetera. There's a lot of hardware growth that should be driving sales over the next 6, 12, 18 months. How does that fit into your expectations around gross margin? I think you've previously given some guidance around sort of heart level sort of feel about right for JB Hi-Fi Australia and The Good Guys. Is that still your thinking? I suppose particularly interested around things like attachment rates, et cetera, and how you're holding that margin given how strong the hardware sales have been.
Yes, we are still, in terms of gross margin, our thinking hasn't changed around more about, it's about maintaining those existing gross margins in JB Hi-Fi Australia and The Good Guys. Commercial, it's, yes, it is a lower gross margin business, but as a percentage of the overall business, it's still not that significant in JB Hi-Fi Australia and The Good Guys. We are comfortable we can continue to grow commercial within JB Hi-Fi Australia and The Good Guys without having a really significant impact on the gross margin.
Maybe just second one for me as well, just around the CapEx side of things, just how you're thinking about the outlook for CapEx from here, and particularly I suppose in the context of questions around supply chain. Is there an inflection point in terms of sales, or does marketplace tend to become a certain level where you think you need to do a bigger lick of investment around supply chain?
Not necessarily marketplace. No, look, we're comfortable managing our existing store base within that CapEx envelope. If we were to do something more material on supply chain, we would absolutely need to consider that capital investment and making sure we'd get an appropriate return on it. At the moment, that isn't contemplated, and if we were to do something, we would obviously inform you at the right time.
Fantastic. Thanks, guys. Appreciate it.
Your next question comes from Craig Woolford with MST Marquee.
Good morning. Well done, Terry, on an outstanding career with JB Hi-Fi. Amazing performance of the business over many years. First question on the gross margin outlook. I constantly wrestle with the half-year figure. Just to be clear, on The Good Guys, do you want us to interpret the full-year result as the right yardstick for The Good Guys gross margin? Switching back to JB Hi-Fi Australia, are you signaling that competitive conditions put downward pressure on gross margins from here, or you can sustain the 22%?
No, it's about maintaining. We've said it over an extended period of time, 22% in gross margin in JB, you're right. The team worked incredibly hard to try and maintain that gross margin. They do a great job of it. Similarly, Craig in The Good Guys, yeah, it's about maintaining those full years. We appreciate in both businesses, it is a bit choppy half on half this year, but yeah, it's more about maintaining those full-year gross margins.
Okay, thank you. Yes, you are a low-cost business. It was still, I'm calculating ex-e&s operating costs were up about 6.6% in FY 2025. You know, still a fairly elevated cost backdrop, which is understandable given what's happening more broadly with wages and rent. As we roll forward to 2026, you know, do you see any opportunities for cost efficiencies given where prevailing wage rate determinations have been and what that rental environment looks like?
I know it sounds simple, but we just continue to manage the costs ourselves. You know, we look at them within the brands. When you look in the brands, we talked a little bit about The Good Guys, about how we felt we had to put some labor back into The Good Guys, so that was a contributing factor in FY 2025. In JB, you had sales growing at 7.5% and costs only growing at 6%, slightly less than 50%. We've said it before, we believe when the sales are there, we want to make sure customers have a good experience and get service. We will put the labor in to make sure we maintain that service. That labor is still the vast majority of our cost base. When you roll forward, we'll continue to roster and manage our labor in line with our view on the sales outlook.
Understood. Thanks, Nick.
Your next question comes from Sean Xu with CLSA.
[Morning] Harry, Nick, and Dave, thanks a lot for taking my question. I was looking at some market analysis released three days ago by a consumer market data agency called Fonto. They mentioned Temu came on the top in the fast-growing consumer retail brand in Australia for FY 2025. I would love to get your update view on the threat from Chinese manufacturers selling directly to Australian consumers through the app on the back of, I guess, Temu's even more aggressive expansion locally in Australia here post-terrific impact on their U.S. export business case.
Look, today, Sean, we haven't seen an impact. You know, come back to that group model slide that Terry ran through earlier. We're typically known for the biggest brands and the best brands. Yeah, to date, we haven't felt a material impact through Temu.
I mean, when I think about categories, they are higher involvement categories, higher dollar value. Generally, people want instant gratification, and they know they can get it. A lot of the product just doesn't necessarily overlap with what may be on Temu other than maybe, you know, accessories, some accessory products. We're not experiencing or being able to identify anything that's being impacted by it.
No problem. Thanks.
Your next question comes from Chami Ratnapala with Bell Potter Securities.
Thank you. As the others said as well, congratulations to you, Terry, and Nick as well. Well done. Two questions from me quickly, if that's okay. I think firstly, quite a few questions on the gross margins. Just want to add the New Zealand and online sort of impacts here as well. Firstly, I mean, New Zealand's still pretty high growth in July. Do you feel like you've had to give away a bit of margin to drive this high growth or any sense of margin for us for that part of the business in July? On the other hand, as the online penetration increases for the business, how do you view margins as well there? Thank you.
Starting with New Zealand, and not specifically commenting on July. You know, New Zealand, we are seeing really good sales growth in New Zealand. We're really pleased with the share we're taking in New Zealand. Our challenge from here is to actually start to improve the gross margin at the same time. That is something we're very focused on working on over the next 12 months. It is still very competitive in New Zealand. It has been a tough market over there for a couple of years. I think our team are doing a great job of executing and taking share in a really tough market.
Coming to online separately, look, I think online, we've said it previously, you know, there's a few moving parts when you compare an online P&L to a store P&L, but overall, we're very comfortable that our margins we can generate online are pretty consistent with what we can generate through our bricks and mortar business.
Perfect. Thanks for that. Secondly, on e&s, I believe there is a new store, the first one under your sort of ownership, under the new management ownership, which seems a bit more smaller. Just trying to understand the strategy going forward. I think in the past, it's been noted the optimal size of around 2,000 sq m . What's the sort of strategy around this going forward for FY 2026?
Yeah, there's probably two new stores that you've seen. There's one in Victoria in Epping, and then there's one that we will open shortly down in Hobart. They're probably both a little bit smaller than that 2,000 sq m . I think going forward, we like to think we can retail from multiple different store sizes. I think a standard store is around that 2,000 sq m going forward. The Hobart opportunity is definitely smaller. It's more opportunistic, taking over a site from a retailer that exited the market down there. We're trading out of what we effectively inherited down there. Going forward, we'll look at getting a more consistent size store as we expand.
Thank you.
Your next question comes from Bryan Raymond with JP Morgan.
Thanks, guys. Once again, congrats to Terry and to Nick. My first question's just on, I'm trying to reconcile a couple of comments, actually. I want to confirm what one of the answers before was, that the Nintendo Switch 2 drove most of the acceleration from 3Q to 4Q. That was a 220 basis point acceleration. I don't know, just want to confirm that's right. If so, there was no sort of mix effect on gross margin or no material mix effect, I think Nick, you might have mentioned earlier on gross margin second half. I just want to make sure I'm understanding those two things are both there.
Yeah, it was a very, as you probably have seen, it's been a very successful launch. The pre-orders all were delivered in that Q4, which gives a good bump in sales. Mix overall, there's lots of things happening in mix. Yes, overall for the half, I would say there's not a material mix impact from the Switch.
Okay. Just to follow up there, did the Nintendo Switch 2 have much, or any other product releases have a meaningful impact in July, or was that pretty, was that a, I think it was a few months ago that got released from memory? Was July a cleaner read is what I'm trying to get in terms of trading points?
Look, it's definitely cleaner than Q4. There's some benefit from the Switch again in July, but as Terry, you know, said earlier, we're constantly seeing a new or a hot product come into the business. Whilst there might be something new this year, it's likely, you know, or it is that we'll be cycling something the year before, and there'll be something completely different coming in the next few months. July is, I'd say July is reasonably clean.
Okay. Great. And then just more broadly, it seems like a lot of the key categories you guys are in, particularly in JB Hi-Fi Australia, are seeing good ASP growth at the moment. You mentioned earlier AI laptops are an example of that. We're seeing it in smartphones as well to some degree. How would you characterize overall the sales growth you're generating between volume and price? Are you seeing kind of good volume growth to go alongside what appears to be a good ASP cycle? I'm just interested in your broad comments there. I'm sure it is category specific, but I'd be interested in anything you can add there. Thanks.
Yeah, broadly, yes, you are. You're seeing good volume growth and ASP growth in JB. Both are contributing in JB. In The Good Guys, the growth is more driven by volume growth, so less ASP growth and more volume growth in The Good Guys.
Right. Okay. Great. Thanks, guys.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Phil Kimber with E&P.
Hey guys, congratulations as well. JB sort of doing management transitions best in class, so well done. My question, firstly, just on category, you mentioned Switch was strong, but we'd had industry feedback that the AV category had been a little bit more challenging recently. Any sort of color you could provide on that would be great. Thank you.
Yeah, it's been pretty consistent with what we've seen. TVs in the second half have been a bit more challenging, and it's, you know, particularly ASP. ASP in the TV goes probably being the biggest challenge most recently.
Is that fear of the discounting effectively?
Oh, it's full of people trading down. Yeah, a bit of people trading down. It's, you know, we've called out repeatedly in the pack around proving value and making sure we demonstrate value. We can see people are still actively looking for value in that category. The Chinese brands have been very strong over the last 12 months- 18 months, and that does put some pressure on ASP in the category.
Right. Just a question around written sales versus delivered. I assume your sales that you're reporting are delivered sales. Is there any, you know, I'm thinking maybe for The Good Guys mainly here and perhaps e&s, given they had a bit of a soft July. Is there anything we should be aware of? Like, you know, I don't know, there were more deliveries made in June, so you captured the sales quicker than you otherwise would have. Just trying to think about how that can work from a very short-term focus on just July sales.
It's definitely more meaningful in e&s than it is in JB Hi-Fi Australia and The Good Guys. Yeah, the gap between what we would call written and delivered in JB Hi-Fi Australia and The Good Guys is reasonably short. As you'd expect in JB Hi-Fi Australia, and then in The Good Guys, as Terry mentioned, it's, you know, primarily a replacement product in The Good Guys, so customers tend to purchase and want it quite quickly. That is very different to e&s where there is definitely a longer lead time between written and delivered. As a result, you're right, it can be lumpy in an individual month. What we reported there is, you know, all the numbers we reported are delivered. That is delivered in e&s in that particular month, and it will move around month to month.
Was that why e&s was just a bit soft? It went from 4% for the year, like for like, to - 2.7%?
Yeah, it is. That's why we never love giving one month figures, but we do it. Yeah, it is absolutely that.
Right. Thanks so much .
Your next question comes from Michael Simotas with Jefferies.
Thanks. Thanks for taking another one. Just wanted to understand the thinking around the lift in the dividend payout ratio. I mean, clearly the balance sheet is very conservative, and we've been talking about that for a while. Is this meant to be in lieu of special dividends? That'll sort of take you to the level of distribution that you want to do, or is there still some potential for specials going forward as well?
Thank you. You can see there's the net cash position of $284 million at 30 June. The distribution of the final and the special dividend will distribute $224 million of that back to shareholders and get you back closer to a net cash position. Moving forward, the dividend payout ratio change helps to manage that cash balance moving forward. In effect, it is a replacement for a special dividend in the sense that we have the flexibility to move up and down that range to return certain excess capital to shareholders, over and above what would ordinarily be like a net zero cash position.
Yep, got it. That makes sense. Thank you.
We have no further questions. I'll now hand back for any closing remarks.
Thank you. Thanks everyone for all your kind comments for myself and for Nick, and I appreciate your interest. I'd like to think that's the end of it. Thank you.
That does conclude our conference for today. Thank you for participating and you may now disconnect.