Top Menu

Citigroup says JB Hi-Fi likely to cut jobs, close one head office

 

ADVERTISEMENT

Following its downgrade of long term earnings forecasts for JB Hi-Fi and Harvey Norman, Citigroup expects the electronics industry to consolidate further.

The firm’s prediction is driven by:

  • Lower store growth: A slow-down in store roll out over the first five years post Amazon launch, which precedes a substantial reduction in store footprint over the following five years.
  • Lower sales density: Sales per square metre declines by 7 per cent to 11 per cent peak to trough as ASPs decline and Amazon takes share.
  • Operating deleverage: CODB per square metre is being reduced by 3 per cent to 5 per cent peak to trough, more than offsetting natural cost inflation.

“We expect the electronics industry to likely consolidate further, as retailers rationalise store footprints from the current over-stored position,” Citigroup said in a statement provided to Retailbiz sister publication Appliance Retailer. 

“We expect JB Hi-Fi to become more efficient, likely closing one of their two Melbourne head offices and upgrade their synergy targets to $50 million per annum.

“We estimate JB Hi-Fi could generate ~$20 million to $30 million from head count and rental costs from consolidating the two Melbourne head offices and eliminating role duplication.

ADVERTISEMENT

“The Australian electronics industry is substantially over-stored versus the UK and US, with almost twice as many stores per million people. As a result, we do not consider store density to be a buffer in the Australian market,” the statement said.

JB Hi-Fi was contacted for comment but failed to reply prior to the publishing deadline for this article.

This story originally appeared on Appliance Retailer.

 

Want the latest retail news delivered straight to your inbox? Click here to sign up to the retailbiz newsletter.

, , , , , , , ,