Good morning, and welcome to the JB Hi-Fi Group 2026 full year results investor conference call. Today's call will commence with a short presentation from JB Hi-Fi's Group CEO, Nick Wells, and Group CFO, David Giansalvo. Following the presentation, we will open to questions from investors with a limit of two questions per investor, and the call will conclude around 11:30 A.M. We welcome representatives of the media to this call, and as with previous calls to remind you, we will only be taking calls from investors. I will now introduce and hand over to JB Hi-Fi's Group CEO, Nick Wells.
Thank you. Good morning, everyone. Thank you for joining us, and as always, thanks for your interest in the business. We will talk through the presentation and then allow some time for questions. Starting, I'll turn to slide four, titled Group Model. Most of you will be familiar with this slide, so I'll quickly summarize it. We have three great brands that are all very complimentary, JB Hi-Fi, The Good Guys, and our most recent edition, e&s. Each brand has its own purpose and a clear focus on specific categories and segments. JB is known for technology and entertainment. The Good Guys is a leader in home appliances, particularly entry to mid-market products and with the replacement customer. While e&s is dominant in premium home appliances and bathroom products, with a strong focus on the renovation and construction markets, and primarily in Victoria today.
All of our brands go to market across multiple channels with stores online, over the phone, chat, and commercial. Our value proposition in each brand is simple. The best brands, a big range, and low prices. We are absolutely known and trusted for value. With our passionate and knowledgeable team members, we consistently deliver exceptional customer service. All of this is supported by our key competitive advantages, which I'll talk to on the next slide. Turning to slide five and our four key competitive advantages, and just some key call-outs. Firstly, scale and diversification. We have strong and engaged supplier relationships, both globally and locally, that recognize our scale. We have a large, engaged, and diverse customer base and high traffic stores and websites, which provide significant marketing opportunities and reach.
Our multi-brand approach provides us the ability to have diverse and differentiated offers with a wide range of categories and different go-to-market approaches. Secondly, our low-cost operating model. We have a constant focus on productivity and minimizing unnecessary expenditure, and we are the lowest cost operator in our categories. The efficiency that we get through this model allows us to maintain low prices and drive value for our customers. Third, multi-channel, which is fundamentally about giving customers absolute choice on how they wish to shop with us. Our stores provide easy access for customers to transact, but are also destinations for discovery and advice. Online is used for both research and convenience purchasing, and phone and chat gives customers who are not in the store the ability to access staff knowledge and advice, along with price negotiability. Lastly, and importantly, people and culture.
Our knowledgeable and passionate team members provide exceptional customer service. Our dynamic and flexible model allows the business to pivot quickly and adapt to any changing market conditions. Turning to slide six, we have today released our FY 2026 responsible business report, which was previously called our sustainability report, and outlines our commitment to having a positive impact on our people, community, and environment, and generating long-term sustainable growth. For our people, we are focused on supporting them and ensuring a safe, inclusive, and respectful workplace, whilst always looking for ways to provide our team members with flexibility and opportunities to grow and develop. For our communities, we seek to make a positive impact in the communities where our team members live and work, and to work with our supplier partners to protect and further human rights.
For the environment, we are committed to minimizing the impact that our operations may have on the natural environment and proactively reducing our waste and emissions. We are making some really great progress on our initiatives with examples like 68% of our energy now coming from renewable sources and recycling 12,000 tons of e-waste in the last 12 months. I'd encourage you to read the report to get a full update. Turning to the Group FY 2026 performance and starting on slide eight, we will talk to the results in more detail as we move through the presentation, but we are pleased to report record sales and solid earnings for FY 2026. In a retail environment where customers are seeking value, our brands continue to resonate, and our teams continue to execute to a high standard.
Total sales exceeded AUD 11 billion for the first time, up 4.8% on FY 2025 to AUD 11.06 billion. EBIT was AUD 734.4 million, up 3.8% on FY 2025 underlying EBIT and up 5.8% on FY 2025 statutory EBIT. EPS was 448.1 cents per share, up 2.9% on FY 2025 underlying EPS and up 5.9% on FY 2025 statutory EPS, and we today declared a final dividend of 127 cents per share, up 22 cents per share or 21%, bringing the total dividend for FY 2026 to 337 cents per share, up 62 cents per share or 22.5%, and representing 75% of NPAT.
We'll take slide nine as read and turn to divisional performance, starting with JB Hi-Fi Australia on page 10. On slide 10, in what has been a unique period for the technology categories, with significant supplier price rises and availability challenges, we were pleased to report growth in sales and earnings in JB Hi-Fi Australia.
I'll turn to slide 11 and cover in greater detail. Total sales increased by 4.4% to AUD 7.42 billion, with comparable sales up 3.2%. From a category perspective, it was a good year for computers, with growth across a number of key brands and good results from our AI-enabled PCs and gaming PCs. Mobile phones continue to perform well, with growth both in unit and in ASP, driving sales growth. Within fitness, wearables continue to perform strongly, but we've also seen successful results from our newly expanded health and wellbeing categories. In small appliances, the momentum remains strong with lots of innovation. Coffee, robotic vacuums, and kitchen appliances all performed well, as did our expanded personal care categories.
Our IT category saw strong sales growth, particularly in the second half, with customers responding well to new products. Online sales increased by 7% to AUD 1.28 billion or 17.2% of total sales.
Sales growth in Q4 was impacted by supplier price rises and stock availability shortages in some of the key tech categories, along with cycling the Nintendo Switch 2 release in the prior year. Gross profit increased by 4.2% to AUD 1.63 billion, with gross margin down five basis points to 21.94%, driven by sales mix. This was a solid result in a competitive environment. Cost of doing business was 12.46%, up four basis points, and in absolute terms, grew 4.8%, with continued cost control and investment in new stores and strategic initiatives. EBIT increased by 3.2% to AUD 547.3 million, with EBIT margin down nine basis points to 7.38%. Over to slide 12 and JB Hi-Fi New Zealand performance.
It was pleasing to see our performance improve in New Zealand and to record strong sales and earnings growth, having been investing in growing the business in the New Zealand market over the past few years. I will turn to slide 13 and cover in greater detail. Total sales increased by 26% to NZD 499.5 million, with comparable sales really pleasingly up 15.3% as the business continues to resonate with customers and expand its reach. Like Australia, results from mobile phones, computers, and small appliances have been strong. In audio, we are doing well in headphones, sound bars, and party speakers, while games hardware benefited from a full year of the Nintendo Switch 2. Online sales increased by 36.7% to NZD 86.2 million or 17.3% of total sales.
Gross profit increased by 29.1% to NZD 86.9 million, with gross margin up 41 basis points to 17.41%, driven by improvement in key product and services categories. Cost of doing business was 13.66%, down 106 basis points, and in absolute terms, grew 17% with continued investment in new stores and strategic initiatives. Operating leverage from strong sales growth and disciplined cost control resulted in EBIT of NZD 4.1 million, up NZ$4.3 million, with EBIT margin up 88 basis points to 0.82%. Now turning to The Good Guys on slide 14. It was a really pleasing result for The Good Guys, with strong execution by the team driving solid sales growth and strong growth in earnings. I'll turn to slide 15 and cover in greater detail. Total sales increased by 2.7% to AUD 2.94 billion, with comparable sales up 2.7%.
Portable appliances growth was led by continued innovation in the category and solid results in coffee. Floor care continues to show strong growth underpinned by growth in robotic vacuums. Cooking growth was driven by growth in inbuilt cooking and range hoods. Refrigeration growth was driven by consumers shifting into larger capacity models. Audio also performed well, led by headphones. Online sales increased by 13.1% to AUD 481.3 million or 16.4% of total sales. In a weaker home appliance market in Q4, The Good Guys continued to execute strongly and take market share. Gross profit increased by 3.9% to AUD 698.9 million, with gross margin up 27 basis points to 23.74%, driven by improvements in key product categories as we continued to grow. Cost of doing business was 14.25%, up eight basis points, and in absolute terms grew 3.3% with continued disciplined cost control.
EBIT increased by 6% to AUD 184 million, with EBIT margin up 19 basis points to 6.25%. Turning to e&s on slide 16. FY 2026 in e&s has been heavily focused on integrating e&s into the broader group and investing in the systems, processes, and capability to set the business up for future growth. I will turn to slide 17 and cover in greater detail. In e&s, total sales for the 12 months to 30 June 2026 were AUD 273.1 million. In FY 2025, the group consolidated 10-month sales, and as a result, on a statutory basis, FY 2026 sales were up 21.3%. For comparative purposes, for the full 12 months, total sales were down 0.2%, with comparable sales down 3.2%. Sales revenue has been impacted by the migration of wholesale sales to agency sales, that for external reporting purposes, are recognized as a commission only.
Total sales on a gross basis were up on the prior year. Gross profit was AUD 81.2 million, with gross margin at 29.72%, up 117 basis points, driven by sales mix and the migration to agency sales. Cost of doing business was 26.15%, up 284 basis points, driven by investments in strategic initiatives, including in stores and the commercial division, which are generating written sales growth that will be delivered and recognized in future periods. EBIT was -AUD 4 million as the business invests in strategic initiatives that are setting us up for strong growth over the coming years. I will now hand over to Dave for the balance sheet and cash flow.
Thanks, Nick. On slide 19, the balance sheet, and starting with inventory. Inventory was AUD 1.36 billion, up 4.5% or AUD 57.9 million year-on-year. Inventory turnover was down 24 basis points to 6.46 times. Payables, which would ordinarily move in line with inventory, were down 5.2%, or AUD 46.8 million year-on-year, as inventory in the technology categories was purchased earlier in Q4 to buy ahead of supply price rises and to secure stock leading into the key June promotional period. As a result, net working capital was AUD 160.8 million, up AUD 85.2 million year-on-year. On slide 20, highlights on the cash flow statement. Operating cash flows and operating cash conversion, whilst down year-on-year due to the increased working capital in June, continue to be strong.
CapEx was AUD 87.4 million, up 6.4%, or AUD 5.3 million year-on-year, with investment in the store portfolio, online and strategic initiatives. Dividends paid of AUD 453.7 million, which is up AUD 68 million year-on-year and results from the payment of the FY 2025 special dividend that occurred in September, and the increase to the dividend payout ratio for the interim dividend that was paid in March and represented 75% of NPAT. Net cash was AUD 206.5 million, with continued strong cash generation offset by the increase in working capital and incremental dividends paid. On slide 21, capital management. As announced in August 2025, from FY 2026, the board increased the dividend payout ratio from 65% to a range of 70%-80% of NPAT.
The final dividend announced today is AUD 1.27 per share, fully franked, up AUD 0.22 per share or 21%, bringing the total ordinary dividend for FY 2026 to AUD 3.37 per share, up AUD 0.62 per share or 22.5%, and represents 75% of NPAT. The record date for the final dividend is the 28th of August, with payment to be made on the 11th of September. The group continues to maintain a strong balance sheet, and this gives us additional flexibility to manage through the current operating environment. The board will continue to review the group's capital structure with a focus on maximizing returns to shareholders and maintaining balance sheet strength and flexibility. I will now hand back to Nick to go through the group focus areas for FY 2027.
Thanks, Dave. I will now turn to the group focus areas on page 23. We have five key areas of focus for the next 12 months, which will drive both short-term and long-term growth. These are retail execution, store growth, multi-channel growth, supply chain, and e&s expansion. I will talk to each on the next slides. Turning to slide 24, retail execution. In a competitive retail environment, our strong retail execution remains essential. We will continue to actively demonstrate and prove value to our customers and utilize our supplier relationships to access stock, create best-in-market promotions, and win at key sales events. In an environment where we have seen significant supplier price rises, we will use the breadth of our range, brands, and price points to give customers choice to trade up or to trade down.
We will keep our operating model simple and efficient, focusing on the metrics that matter, like converting on our strong customer traffic, and we will drive operational efficiencies and productivity with initiatives like electronic shelf labels to enhance our in-store experience and enable us to invest in customer-facing roles and in-store service for our knowledgeable, passionate team members. Turning to slide 25. We will continue to grow our store network with both new store openings and expansions in FY 2027. In JB Hi-Fi Australia, we will open four new stores, continuing our expansion into regional locations, and relocate one store. In JB Hi-Fi New Zealand, we will open two new stores and relocate one store.
In The Good Guys, we will open one new store and relocate five stores, and extend two stores to right-size previously undersized stores and grow our available selling space. Moving to slide 26 and multi-channel growth.
We will continue to strengthen our multi-channel capability, leveraging our significant online and in-store traffic. We will grow our online phone and chat sales to meet customers' changing shopping needs, evolve our websites with expanded agent e-commerce experiences that will include natural language product search and agent-based shopping experiences, and expand our marketplace offer. Our membership programs will remain a focus, delivering personalization at scale. At the same time, we will ensure consistent customer experiences across all touch points and stay connected with shoppers however their shopping journeys evolve. We will grow our commercial business and expand our retail media network, providing more options for our partners to leverage our strong online and in-store traffic to create unique multi-channel advertising experiences. Turning to slide 27 and supply chain. Our investment in building and maintaining a fit for purpose supply chain network is ongoing.
We will continue to focus on delivering best-in-class delivery options for our customers across all of our channels and leverage our new transport management system to improve the customer experience. We will expand our big and bulky Home Delivery Centres, starting with Melbourne, to extend our range and maximize in-stock positions. We will also expand our HCC delivery network to open up big and bulky product range and depth to more regional customers. For peak this year, we will expand our centralized online fulfillment and roll out semi-bulky store replenishment for high volume lines for selected JB Hi-Fi Victoria, New South Wales, and Western Australian stores. Turning to the final focus area, e&s, on slide 28. We are investing in e&s for future growth, and we are really excited about the opportunity we have to grow e&s.
It is a business that gives us access to expanded product categories and different customers, such as developers and large commercial builders, that we do not cater for in JB and The Good Guys. We have made some key management appointments, who bring significant industry experience and started building out our commercial team outside of Victoria. We have commenced work to migrate our website to Shopify, which will be completed in the second half of FY 2027 and will significantly improve our online customer experience. In addition to the website, we are building our internal systems and tools to support our future growth. From a store perspective, we have developed a new store layout that reinforces the e&s experience, and we have started work on identifying potential new store locations to expand our reach regionally. Now moving to slide 30 and the group trading update.
For the period 1 July to 31 July 2026, total sales growth for JB Hi-Fi Australia was - 0.5%, with comparable sales growth of - 1.4%. Total sales growth for JB Hi-Fi New Zealand was 20.9%, with comparable sales growth of 11.7%. Total sales growth for The Good Guys was - 1.7%, with comparable sales growth also -1.7%. Total sales growth for e&s was -2.7%, with comparable sales growth of - 4%. We continue to see variability in trading, with customers increasingly looking for value and migrating spending to key promotional events, noting that July is not a big promotional period. In the technology categories, sales growth continues to be impacted by supplier price rises and stock availability. We expect the retail environment to remain uncertain in the short term.
As we always have, we will continue to focus on driving demand and growing market share through creating great value offers for our customers, leveraging our strong supplier relationships to maximize stock allocations and delivering exceptional customer service. Over now to our investment checklist on page 32. You will all know this well, so I will not go through it in detail. However, I will highlight a few points that will continue to drive our success. We are the scale operator and leader in our market with three unique and relevant brands that are known and trusted for value. We have a diverse and resilient product range, from essential technology to replacement home appliances and continued product and category innovation. We have a flexible business model with a proven ability to adapt and grow, and a very experienced management team. Thank you, and we will now open up to questions.
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. If you are on a speakerphone, please pick up the handset to ask your question. Just a reminder for two questions per person. Your first question comes from Shaun Cousins with UBS.
Thanks. Good morning, Nick and David. My first question, just around revenue. Negative comps in JB Hi-Fi Australia and The Good Guys for July 2026. That is, I think the first period of negative comps you have done since 2014, ex sort of COVID period. How much of this was the tough macro, be it cost of living, higher interest rates, falling house prices post the budget, versus how much of it was, I guess, rising computer chip prices there with elasticity, somewhat of a new headwind and/or availability issues there? Just keen to sort of dig into what are the drivers of the negative comps for July, please, in your two main businesses.
Yeah, Shaun, it is a bit of a combination of everything. Yes, from a macro perspective, it has got a little bit harder. But like I said in my commentary, I think it is one month and it is a small month, and I would say it is not a promotional period. What we can see is that those promotional periods have become increasingly important when customers are looking for value. Periods like end of financial year in June and Black Friday become really important, and then maybe it sucks a little bit out of those non-promotional periods like July. So I think that is one component to it. In JB Hi-Fi Australia, we are still seeing some sort of one-off type impacts from cycling, so there is a little bit of impact.
There is like a Nintendo Switch 2 in the prior year in July as well, like there was in Q4. There is a bit of a change to timing of Samsung Galaxy Z Fold release into August this year instead of July last year. Then it is the price rises and the availability which are kind of impacting quite broadly. It does vary depending on the supplier, but we have seen pretty material price rises. Post those price rises, we are seeing changes to the, I suppose, the frequency of promotional activity and changes to both the length and depth of some of that promotional activity. So, that is also having an impact.
Great. Okay. Thank you. Maybe just regarding your gross margins. You highlighted negative mix changes in the second half 2026. Can you maybe discuss what they were? Then you've also sort of called out the risk to gross margins a little bit in July. There, you had customers looking for value, migrating spend to promotional events, then I guess the consumer seeking great value there. We're keen to understand what the outlook for gross margins could be, and can you sustain the 22% gross margin that you've been able to achieve for a very long time?
Yeah, I think, like I said, it is a very value-driven market, and it's very promotional and competitive. But I think, as we've done well over an extended period of time, we've been able to manage it. I think you can see in JB Hi-Fi in Australia, we've consistently said it should be circa 22%. It's a little bit under over the course of FY 2026, which is primarily driven by sales mix, and that is mixing more into some of the tech categories and probably a little bit weaker sales in a category like TV or some of the higher gross margin categories. So feel like we're managing it well. Still feel confident that we can continue to compete, and we're pretty used to operating in a highly competitive environment. So from that perspective, okay.
In FY 2026, we have had a little bit of impact from, again, as these price rises roll through from suppliers. We have a pretty efficient stock model and low weeks cover, so we've typically got more of the newer stock at a higher price point compared to our competitors who might have the older stock at the cheaper price. So that, again, was something that was in there in the second half that we had to manage. But overall, confident in JB Hi-Fi Australia that we can still target that 22% gross margin. Then The Good Guys. You can see there, strong gross margin in The Good Guys. The Good Guys team doing a really good job of working with suppliers around leveraging our scale and making sure we're rewarded for our growth in what has been a tougher market in those home appliance categories.
Great. Thank you very much, Nick.
Your next question comes from Adrian Lemme with Citi.
Hi. Good morning, Nick and David. I just wanted to pick up on your comment there on TVs. We talked about six months ago that the comps were starting to get a bit easier in that category, but it doesn't seem to be turning around. Are you able to talk a bit on that category, please?
Yeah. Look, Adrian, it hasn't materially changed. We are lapping easier comps in the category now. But when I look at our categories and particularly look at the technology categories, I would say the TV category is probably one of the more discretionary categories. That, combined with not having seen a lot of innovation in the category, I'd still say it is one of our weaker categories at the moment.
Okay. Thank you. Can I just ask a question about PCs? Our data suggests that volumes are down quite materially. I guess you've got the ASP going up, but it sounds like the other issue is that suppliers are maybe promoting this category less, so that's also impacting sales. Can you talk to those dynamics, please?
Yeah. If you look out over an extended period of time, we are talking about over the last six months, we have seen very material price increases in PCs. In some brands, that can be in excess of 50% price rises. As we talked about previously, the major driver of that is the increases in cost of memory, that is the demand for hardware used in the AI data centers is sucking up a lot of the memory supply. So memory prices have increased significantly, that is driving costs higher as a price and making PC prices higher. We are definitely not seeing ASP increases up at those levels as we are talking about. So the price rises are flowing through and some customers are willing to pay more.
There might be a gaming PC customer, they are willing to pay more for the higher spec model, whereas a lot of customers are trading down and trying to stick to their price points. In terms of what we are seeing impact on demand, to date, it has been okay. Just for context, for the full year across PC and Apple, we are in unit growth. So we have got some ASP growth and unit growth as well in the category. It can be lumpy when price rises go through. Obviously, prices are established at a new price, then it impacts promotional activity post those prices. Also, suppliers are dealing with significant cost increases, so they are trying to maintain their profitability in those categories as well. So overall, it is washing through. The other challenge we call out is availability. It does because supply is tight.
That is the key reason why a lot of the time there may not be as long or as deep a promotion as there has been in prior years. So all of that is coming together. You would expect it to wash through over the coming six months. It is an unusual phenomenon for us to have significant price rises in the technology category, it is just a short-term impact that will flow through and be resolved hopefully over the next six months.
Understood. Thank you, Nick.
Your next question comes from Michael Simotas with Jefferies.
Good morning, Nick and David. First question from me is on costs. JB's always done a good job of managing CODB. That continued in the second half, but CODB did grow faster than sales. To what extent can you control costs if sales remain tough? Is there any way that you can continue to match your cost growth to sales, or should we expect some operating deleverage if sales remain where they are?
Thanks, Michael. I will take this one. I will step through FY 2026, and you kind of mentioned the numbers there, but just to give you context for how we are thinking about it for FY 2027. For FY 2026, we had some Fair Work increase and a super increase. Then obviously we manage our wages as a percentage of sales. We forecast sales each month, and then we roster up and down accordingly. Depending on the time of year and the brand, we have always got a good mix of casuals in our business, approximately 25%, and that enables some flexibility. As you mentioned, you can see that coming through in the numbers in FY 2026 when we had stronger sales growth in the first half. We reinvested with CODB broadly in line with sales.
But in the second half, you could see that CODB came back down to 2.6% in JB Hi-Fi Australia and also 2.6% in The Good Guys as those sales came down. The team did a fantastic job of managing that cost base in that more uncertain environment whilst also maintaining conversion in store. When you look forward to 2027, and there is a Fair Work increase of 4.75%, we will continue that practice whilst being very focused on ensuring we do not compromise our in-store service, which is a critical part of our model. Then to your point on trying to manage it at or below those levels, we will look at productivity benefits. Some of those are more efficient data-led rostering. You heard Nick call out the ESL rollout. This will enable us to save or reinvest in labor hours that would have otherwise been spent ticketing.
There's no doubt it becomes more difficult in the current environment, but we have the system structures and low-cost culture in place to help manage it.
I'll just jump on what Dave was saying as well. I think we have the flexibility to be able to do it, but I will emphasize, we're always going to take a long-term view and make sure we remain really focused on customer service and really making sure that we just maintain our focus on our customer. We definitely have the flex to do it, but we will take a long-term view to make sure we maximize the opportunity that's there and available for us when our customers are in our store and continue to differentiate on that service and advice, which is absolutely what stands us apart from our competitors.
Thanks. Would it be possible for CODB in JB Hi-Fi Australia and The Good Guys to decline year-on-year if top-line trends remain tough, or would that be too much to ask given the underlying inflation?
It is possible. It is possible, but it isn't something that we would be looking to do.
Right. Thank you.
I think it would absolutely risk service.
Yep. No, thank you.
Your next question comes from Tom Kierath with Barrenjoey.
Morning, guys. Just on The Good Guys' margin in the second half, the gross margin, can you maybe just give us a bit more color on what's happening there and whether there's any kind of, you're buying stock early and then there's a price rise and there's some sort of benefit that happens later there. It just looked a bit, I mean, it rose quite a lot in the second half.
Yeah. It's not price rise driven because that's more in the tech categories, which is less important for The Good Guys. There's definitely mix helping in it as we're mixing into those larger home appliance categories where they are typically higher gross margin. So that is helping. Then, it is a tough market in the home appliance market and we're delivering pretty solid growth and we are being rewarded or recognized for our scale in what is a tough market. So I think it's a combination of mix and our scale and working with suppliers to maximize the opportunity.
Thanks. Then just broadly, there have been some competitors entering the categories. Bunnings is coming into white goods and Officeworks is having another go with laptops. Have you noticed a more competitive pricing environment and your pricing gaps narrow a bit as other players start coming in?
Look, as I called out, it's competitive, but we're used to dealing with competition and I think we're managing it well. If you look back over the years, Tom, you know as well, we've seen a number of different competitors come and go, and we'll expect that to continue. As we always have, we'll make sure we stay focused on the customer and we'll just continue to make sure we're known for value. We'll leverage our scale with suppliers to make sure we get the best possible pricing for our customers. We'll differentiate on service. All those things that have held us in good stead over the years will continue to hold us in good stead in an evolving competitive market. But like I say, I think, if you look over a number of years, there's always been competitors and we're sure that that's going to continue.
Yep. Great. Thanks, Nick.
Your next question comes from Bryan Raymond with JPMorgan.
Morning, Nick and David. Just on continuing on this theme around availability and promotional activity post-price rises. I agree July is not something we should be focused too much on given the size of that month, but you've got some big events coming up in 2Q, obviously Black Friday and Boxing Day. I'd just be interested in your thoughts around whether the supply base is starting to. Sorry, whether that supply base will be less promotional at those major events, or do you think they're keeping their powder dry at this stage in order to hold that back for those key events?
No, at this stage, we're very optimistic on those big promotional events. Like I say, we can absolutely see customers are looking for those key promotional periods, and we think that 2Q promotional period will be very significant, and I think suppliers are lining up behind it as well. No, we're still very optimistic for those 2Q promotional events.
You do not think availability will be a challenge there, given that has been a challenge of late?
No, I think we are close to getting through the bulk of the availability challenges.
Okay, great. Just continuing on the theme around gross margins, just the JB's 2H gross margin down 25 basis points year-on-year. I assume mix played a role there, but given Apple was in short supply, I thought that might have helped it a little bit. Was it mainly price matching peers with those slower inventory turns, or is there other factors at play in that second half?
One for a start, I would say it is 21.93% in the second half. I know it is a little bit under our 22%, but it is cycling at probably an elevated gross profit position in the second half last year. The stock positioning is having some impact in that second half. Like I said earlier, the fact that we have a leaner stock position and have more of the stock at the higher price compared to some of our competitors who can hold price lower for longer as a result, that is having some impact in that second half.
Okay, great. Thank you.
Your next question comes from Ben Gilbert with Jarden.
Morning, guys. Again, not to focus too much on July, but just wrapping up what you both said around July. So you've got the headwinds that you're cycling through from Switch and they've caught 100 basis points in the PCP. You've got Samsung a couple of weeks later, which presumably would be dragging out availability issues. As we start to move through the rest of the year, those in theory ease, plus you've got more promotional periods and you've still got this pricing situation coming through. I appreciate you haven't been given guidance, but you put all that together and the inference would be that you're expecting comps to move at least flat or positive through the rest of the year. Is that a fair assumption?
I'm just trying to put a lot of what the puts and takes you talked around July through, because it feels like a lot of those headwinds should start to ease. If anything, we start getting some tailwinds and you chuck GTA, et cetera, in there as well.
Yeah, look, I think that's right. We look at it and go, July is one month and there are some unique factors in July. You know our business well, we don't enjoy recording negative comps, and we'll be absolutely driving to get back to positive sales growth. I think Q1, it's hard to see. You'd expect momentum to improve into Q2, as you enter that key promotional period. Yes, there is some product release coming in Q2, which would be helpful with GTA 6 , and you would expect Apple will have a release in Q2 as well on phone. So there's some good product coming through. Then we get to start to cycle easier comps into the second half. So yes, there are some shorter-term headwinds at the moment, but we would expect it to improve over the course of the year.
Thanks, Nick. The second one from me. So telco is currently the biggest category now, at least in JB's. Could you just remind us, I think your contract's up next year. There's obviously a bit more competition that's coming in from Amazon and Harvey Norman at the moment. How do you think about continuing to maintain that growth in telco? Is there a scenario where you'd look to split the contract across multiple providers or bring in another player in that will allow you to switch and drive some of that opportunity with the telco category? I'm just trying to think about how you see that as an opportunity for growth over the next 12- 24 months as well.
We're still really confident in the growth outlook in that telco category. I think when we talk telco, there are two pieces. There's the hardware, so selling the handsets, and then there's the services with our partnership with Telstra. On the hardware side, we'd still say the telco hardware, whilst it's our biggest category, it's still one of our lowest share categories. So we still think there are opportunities to grow sales in the hardware side. Then on the service side, we have a very strong partnership with Telstra, and we remain really confident in that.
Okay. Fantastic. Thanks, Nick.
Your next question comes from Caleb Wheatley with Macquarie.
Morning, Nick and David. Just keen to explore this stock availability issue a bit more, if we could. Just keen to understand exactly what categories they were. Do you feel that you've been outwardly impacted because of the stock turn that you mentioned a bit earlier? Then you did say there were signs of easing. Just wondering what the line of sight was on clearing that stock availability issue, please.
Well, look, the conversation, look, it's been very focused on computers. But when we talk availability, I probably should acknowledge there has been categories like gaming where we've seen availability challenges as well. So, in product like PlayStation and Switch, we have had real availability challenges and we are hopeful they will start to improve over the coming months. On the other categories, and I think you would've heard it from Apple, they've seen strong demand for their products globally, and as a result, they've had availability challenges in some of their products as well. So it's brands like Apple, it's gaming, it's some of the PC brands. But like I said earlier, they are improving now and coming into Q2, we've been pretty optimistic that most of that's through. Similarly, with the differentials on pricing, the significant price increases have come through.
We don't know if they're completely done in computers. There might still be some price rises to come in computers, but not to the same extent as what we've seen over the last six months.
Okay. But it sounds like the inference is there that it's a market-wide availability issue, and so because you've solved through it more quickly, you're wearing that headwind earlier. Is that fair?
Yeah, that's fair. Yeah.
Okay, great. Thank you. Just my second question, just on e&s. Appreciate that you've called out reinvestment in the offering there. So it seemed like, of course, earnings are now negative for the time being. Just, yeah, keen to get your thoughts on the pathway from here, where the reinvestment's really going, and how we should think about the turnaround on that front.
Yeah. Look, yes, to your point, we don't like losing money, and it was disappointing to drop into loss-making in that financial year. We're confident we can get it back into positive earnings quite quickly. What I tried to call out through the Q&A and the focus areas, we're putting some cost into the business, which is writing sales revenue at the moment, but they're not converting into delivered sales until the projects are completed. So, we've got the cost at the moment ahead of the revenue, and then we have some initiatives which we're investing in systems and websites and things as well. So some one-off costs. So, yeah, really confident that we're making the right decisions and making the right investments in e&s. I probably expect the market to remain subdued for the next period in e&s, given it is more that renovation and construction market.
I think the market will remain a bit tougher, but definitely we think we can continue to improve our performance.
Caleb, I will give you the example of investing in commercial heads as an example. You put the heads in today and they write written business, but that business might not be delivered for 12-18 months. You do not get the benefit of that flowing through to the sales and the earnings for 12 or 18 months' time. That is that position that we are in at the moment that you saw in FY 2026.
Okay, that is helpful. Thanks, Nick and David.
Your next question comes from Peter Marks with Goldman Sachs.
Morning, guys. Can I just check, when were the worst impacts from the shortages in JB Hi-Fi Australia?
It depends on the category. For example, in July, we have gaming console shortages with Nintendo Switch. It literally depends on the supplier and the category. I am not going to run through every single one, but it is through Q4 and into July. Q3 was fine.
That is helpful. Then just in the inflationary categories, do you think there is signs that the suppliers are prioritizing the margin more premium products and they are sort of neglecting the more entry-level products, or is that something you are not seeing and suppliers are sort of adjusting their-
Yeah.
In favor of the more value products?
No, I think the outcome is that. If you take in the PC categories, the quantum of the price rises mean that it is difficult to get a PC at some of those really entry-level prices. You are seeing it in those real low price point products. There is impact there, and yes, there is less availability, but it is a real challenge to get a device in at some of those entry price points. That is absolutely something you are seeing. I don't think it is a deliberate choice to prioritize the higher profit or higher price point products. It is just the reality of what the cost of memory is today.
Okay. That is very helpful. Thanks, Nick.
Your next question comes from Craig Woolford with MST Marquee.
Good morning, Nick and David. It is a really interesting discussion here. We are just trying to gauge the weakness in sales trends, both for the fourth quarter and the July update, if we looked at two-year growth rates. I am just trying to gauge what you are telling us. Is it more of a supply problem or a demand challenge? If you can, as part of your answer to that, just reflect on how the consumer is responding to price rises, because I think there is quite a lot of mix changes that you have made to the categories to soften the blow on the consumer.
Yeah. It's a combination of both. It's a combination of supply challenges and probably a bit of a weaker demand environment. As we have always maintained, we're just going to stay focused on what we can control. It's hard for us to impact the broader consumer market, so we'll just stay very focused on our categories and our customer. In terms of the supply challenges and what we can see for consumers, like I said, whilst we're seeing significant cost increases from suppliers, we aren't seeing ASP increase by the same amount. So you can see consumers are making choices about what they're willing to spend on certain products, and they are looking like effectively they're trading down by spending a similar amount as they did last year to get a product with less specs than what they would've got the same time last year.
So you can see customers making a choice around where they're willing to spend money. At some of the entry products, that is when it's more difficult, and even in some of the gaming products, it's more difficult. When there's not obvious substitutions, like an entry-level tablet, as an example, which might have had a 25% price increase, there's not really an alternative for that. So that is impacting demand in some of those categories. Like I was saying to Peter, it's very much every product's different, every category is different, every brand's different, and we're just continuing to manage it. The good thing is that we have such strong relationships with our suppliers and we have a broad range of product.
We are managing to get multiple offers out there to customers and are offsetting some of the challenges we are seeing with availability and some of the challenges we're seeing with changes to promotional frequency.
That's very helpful. The other topic that's been interesting is just around not compromising on customer service. Of course, you want to manage the P&L, but also customer service. Can you just share what is the measure of customer service you use? What metric, and how does that get judged month to month?
Yeah. As you would expect, we have measures of NPS internally that we track. But probably the two simplest metrics would be conversion, so we know what customers are coming to our store. If we were reducing hours on the shop floor, if we were impacting service, you would expect to see conversion go down, and we are definitely not seeing that. Then ultimately, sales, and we have always been a very sales-focused organization. If we start to see sales at store level impacted, then we would reconsider our labor allocation.
Yeah. We often see companies manage wage to sales. It makes a lot of sense. But when you have got wage inflation of like 4.75%, if your comps are flat, you have to drop hours. I am just trying to wrestle with the higher wage.
Yeah. It is where you drop the hours, I think is the important thing. As Dave was talking about, we are very focused on productivity, and we definitely do not want to impact customer-facing hours. So, it is making back-of-house processes more efficient. It is things like those electronic shelf labels that we talked about. In a competitive environment, prices are moving consistently, and with printed tickets or handwritten tickets, our team members are spending a lot of time adjusting price rather than serving customers. So an initiative like electronic shelf labels will free up a lot of time to make sure that we can keep that labor on the shop floor and focused on serving customers.
Thanks, Nick.
Your next question comes from Phil Kimber with E&P Capital.
Hey, Nick and David. Just one for me. On the commercial business, I know you talked about it from an e&s perspective, but maybe just a little bit more color in what you're seeing in terms of contracts and whether the pipeline is still there. But in the future, it looks like it's falling away. I'm just not sure what sort of color you can give us there and any sort of commentary by states. Are there certain states that are particularly tough in that part of the market? Thanks.
Yeah. So in the real sort of bulk commercial area, that is where e&s plays relative to The Good Guys and JB. We have got JB Hi-Fi Business and JB Education, and they are more focused on small to medium business and education customers. And The Good Guys, probably more talking to a trade customer in The Good Guys, whereas e&s does have that exposure to developers and commercial builders. It has been weaker in Victoria, as you'd expect, and given that is where e&s is predominantly based today, that is having an impact in e&s. But at the same time, it's still a pretty small business, and we've got a great opportunity to grow share in that. So even if the market does remain a bit softer in developments, we still think we can see really strong growth in e&s in that space.
Thanks. But in the business and education part of the JB Hi-Fi Business, are you seeing any changes there, or that's pretty stable?
It's pretty stable. We had a solid year in JB Hi-Fi Business. It's similar in that the price increases also impact business customers and education customers, so we continue just to manage that. But it tends to be more correlated with retail than e&s, which is definitely more driven by development and construction.
Great. Thanks, Nick.
Your next question comes from Chami Ratnapala with Bell Potter Securities.
Hi, team. Hi, Nick and Dave. Maybe one or two questions from me quickly with the time remaining. Just with the core customer, could you quickly talk to what are the obvious differences between the JB Hi-Fi Business and The Good Guys at the moment in the core customer?
The main differences are you saying in the customer?
Yes, in the fourth quarter, weakness-wise, how different have they been?
Look, I think the key for us is, like I was sort of talking about at the start with how our brands are positioned differently. The key difference we see is in the categories. So The Good Guys, very home appliance-focused. We have seen tougher home appliance categories in that Q4, and The Good Guys, while flat in that market, did take share. JB is definitely more about those technology categories, and we have spoken at length about some of the changes we have seen in those technology categories. I think broadly, we would say consumers are kind of responding to the changes in the categories rather than any broad macro view.
Perfect. Thanks for that. Just on the gross margin of The Good Guys, at the current exit rate of the margin, you spoke to the level of confidence in the JB Hi-Fi business. What are the views for FY 2027 on that gross margin for The Good Guys?
Yeah, it is a very strong gross margin result in The Good Guys, particularly in the second half. You have seen it continually increase over the last few years, and we have been saying it sort of around that circa 23%. It is now up over 23.5%. As we do in all our businesses, we will try and cycle it. Our goal would be to try and maintain gross margin in The Good Guys.
Perfect. Thanks for taking my question.
That does conclude our question and answer session. I will hand back for any closing remarks.
As always, as I said at the start, thank you for your interest in the business, and we will see a number of you out on the road over the coming week. Thank you.
That does conclude our conference for today. Thank you for participating. You may now disconnect.