JB Hi-Fi savaged by investors

JB Hi-Fi's prediction of a FY12 drop in profit, thanks to a "soft consumer environment" and market-wide discounting affecting its gross margin, has caused its share price to slump to a three-year low.

The retailer expects net profit for the 12 months to June 30 to drop at least $5 million from the $109.7 million reached in the previous financial year.

It has predicted yearly net profit to come in between $100 and $105 million, assuming fourth quarter growth hits the expected -2.2 percent. The retailer expects to announce 2012 yearly sales of $3.1 billion. 

JB Hi-Fi’s share price fell almost seven percent to $9.96 on the ASX in morning trade, its lowest point in three years.

JB Hi-Fi’s online sales helped prop up the March quarter with 76 percent growth compared to store sales growth of 1.3 percent. It reaffirmed its plans to open 16 more stores throughout the 2012 financial year, with 10 already operating.

The retailer's predicted FY2012 results are indicative of a market-wide trend. Rival Dick Smith in January announced it would begin closing doors after failing to keep up with a competitive and varied industry.

CEO of Dick Smith parent company Woolworths, Grant O’Brien, cited lower discretionary spending by consumers as the main challenge facing the brand.

JB Hi-Fi CEO Terry Smart said his company suffered similar obstacles but was poised to take up the vacancies left by those exiting the market.

“While this has put additional short-term pressure on both sales and gross margin, we believe that it will lead to a good opportunity for JB Hi-Fi to expand and increase its market share in FY13 and beyond,” Smart said in a statement.