Sector's surprise package is on song

Strong and sustained sales momentum that took hold after Christmas has helped JB Hi-Fi defy the general downturn across the retail sector to post its first full-year profit growth in three years.

The raised profit, up 11.2 per cent to $116.4 million, was held back slightly by lower comparable sales in New Zealand and an elevation in the cost of doing business, namely higher wages, driven by a Fair Work Australia award increase as well as fatter rental bills.

The full-year performance, built on a 5.8 per cent lift in sales to $3.308 billion, was ahead of analyst expectations and the market rewarded the retailer, sending its shares more than 4 per cent higher before closing up 60¢, or 3.2 per cent, at $19.12 - a 27-month high.

There was also good news in the outlook statement for investors, with the sales pick-up pushing into the new financial year. Sales growth for July touched 8 per cent and like-for-like growth was up 2.2 per cent.

JB Hi-Fi said a new pipeline of products should continue to drive interest and growth in the wider electronics market, tipping sales for this financial year to lift by between 6 per cent and 8 per cent on the previous year.

JB Hi-Fi was the first large retailer to report its full-year earnings, with other retailers to follow in coming weeks. However, not all are expected to surprise the market on the upside.

Deutsche Bank analyst Michael Simotas said the positive outlook statement implied better sales in this financial year than the market was expecting, although with the stock performing well recently he believed, the gains were largely priced in.

"Broadly speaking, sales were slightly ahead of our expectations due to higher contribution from new stores, gross margin was in line but cost of doing business was higher," Mr Simotas said. "Notwithstanding this, the group expanded EBIT [earnings before interest and tax] margin by 21 basis points."

JB Hi-Fi boss Terry Smart said the retailer would open a dozen new stores, converting 10 current stores to its new Home appliances concept format.

The company declared a final dividend of 22¢ a share, fully franked, taking total dividends for the year to 72¢ a share.