JB Hi-Fi kicked off the earnings season with its revenue down by 0.4%, but then it warned of a 16% slide in its profit.
👉 Background: JB Hi-Fi is the Aussie electronics retailer that’s been around since 1974. It also owns The Good Guys, which came under a bit of scrutiny recently for misleading shoppers on its promotions.
👉 What happened: JB Hi-Fi kicked off the earnings season with its revenue down by 0.4%, but then it warned of a 16% slide in its profit. But surprisingly, JB Hi FI’s share price shot up more than 10% after the news.
👉 What else: Earlier in the month, retailers had warned of poor earnings so it was assumed that this would apply across the retail market. But, JB Hi-Fi only saw a 16% drop in profit, making “less bad” suddenly became the new “good”.
💡The key to a successful reporting season often lies in not just delivering strong numbers… but doing better than expectations.
💡Last week, Myer warned that its profit will drop 30% because it has been forced to discount its stock. A major profit drop had been priced into JB Hi Fi's share price before their earnings update.
💡So JB Hi-Fi’s numbers were "less bad" than expected which led to this share price rally. In essence, JB Hi-Fi managed to outperform the low expectations set by analysts and investors, and that has created a sense of relief and optimism in the market.
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