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David Richards

COMMENT: Should JB Hi Fi Sell Or Stick It Out?

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The 61% increase in revenue and the 70% increase in profits by JB Hi Fi bode well for the consumer electronic industry. It also sends a clear message that consumers are changing their buying habits with many of them prepared to spend money on games, new TV’s and notebooks than over fashion items or the occasional holiday.

And while the CE industry use to seen as “Toys for the boys” many women are now turning to gaming and entertainment devices such as flat screens and DVD players.


For JB Hi Fi the big question is has the Company peaked and is now the right time for the Company to cut a deal with Woolworths.


The answer is most probably yes on both counts. The downside for JB Hi Fi long term is that penetration of the digital TV market is now hitting the 50% mark with the last 50% more likely to want a heavily discounted product.

Also set to impact the Company is that during the next few years we are set to see an explosion in music, gaming and movie content online with consumers bypassing a retail store to buy from their favourite online site which could well be owned by the likes of Sony or a bunch of Hollywood studios. However a big bonus will be July and August sales which will be affected by heavy promotion by CE vendors selling product off the back of the interest in the Beijing Olympics. 

Also set to hurt is the lowering in cost of PC’s and notebooks with the IT industry already feeling the impact of reduced margins.


Right now JB Hi Fi could demand a premium price from Woolworths who have admitted that they are in the market for an acquisition. While on the other hand Woolworths could well decide to sit on the fence for 12 months to see what sort of result JB Hi deliver in 12 months time.

 


Shares in JB Hi-Fi Ltd rose over 4 per cent after the Company beat forecasts for 2008 full-year profit. They have also said that July and August sales are very strong.


The net profit of $65.1 million in fiscal 2008, is up from $40.4 million in 2006/07, as sales revenue rose to $1.83 billion, from $1.28 billion last financial year.


The result exceeded the company’s recent profit guidance in June of circa $64 million, but the retailer has kept its forecast on hold.


What is abundantly clear is that if CE vendors have the right product whether it be a new iPhone or gaming console or the right flat panel TV consumer will find the money to buy a CE device.
It is also clear from the JB Hi Fi and the recent David Jones results that consumers are ditching their traditional spending patterns for new investments in phones, camera’s, games and music along with flat panel TV’s.

Senior Telstra Executive Quits

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The controversial head of Telstra’s communication division Dr Phil Burgess has quit and is returning to the USA.

The controversial head of Telstra’s communication division Dr Phil Burgess has quit and is returning to the USA.

A US national Burgess got right up the noses of the Howard government in particular former Communications Minister Helen Coonan.

The former Telstra public policy chief transformed Telstra from being a “toe the government line” organisation to one that had a voice and was not afraid of disagreeing with government policy decisions.

Telstra’s Chief Executive Officer, Sol Trujillo said “I have always valued Phil’s advice and his principled approach to public policy and communications. Phil has great integrity and has not been afraid to show leadership, often speaking the truth even when it was inconvenient for established interests to hear it,” Mr Trujillo said.

“Phil has consistently spoken out with great passion and courage, articulating how a national high-speed broadband network would produce enormous benefits for communities and the national economy.

“Phil has made a very large positive impact on the culture and success of Telstra, and like all employees I am grateful to him for the leadership he showed.” Mr Trujillo announced that the new Group Managing Director, Public Policy & Communications, would be David Quilty, who has been Telstra’s Director of Government Relations since January 2006.

 

Telstra say that Dr Burgess will return to his home in Annapolis, Maryland, in early September to support his wife, Mary Sue, whose mother is seriously ill, and to resume his life as an advisor to business and government on matters related to technology and society, a life he put on hold to join Sol Trujillo and Telstra three years ago. Dr Burgess has been Group Managing Director, Public Policy & Communications, since July

2005. He has been responsible for regulatory affairs, government relations, media relations, corporate affairs and the $5.5 million Telstra Foundation.

“The last three years have been enormously consequential for Telstra and Australia – with the full privatisation of Telstra, construction of the world’s largest, fastest, and most advanced wireless broadband network and the transformation of Telstra into the world’s first next generation, fully-integrated telco,” Dr Burgess said.

“Working in a country and culture not your own is an enormous privilege – and working for one of its iconic companies is a privilege amplified. My time in Australia and with Telstra has been

one of the most memorable experiences of my life, both personally and professionally. I came here expecting to stay for 1-2 months. Three years later, Mary Sue and I leave having been

welcomed guests in this wonderful country.”

Dr Burgess said he was proud to have increased the capacity of Telstra to communicate with consumers and the public, represent shareholder interests, put high-speed broadband on the

agenda three years ago, and transform the way the company communicated both internally and externally. “It was hard for some to give up the idea that Telstra is community property. The cultural

change required by privatisation was difficult – both for Telstra and for the government,” Dr Burgess said.

 

“Though we were criticised by some, our new approach achieved important results, including safeguarding new investments like Next GTM and ADSL2+ from value-destroying regulation, winding back regulation on more than four million copper telephone lines, and the reversal of a $1 billion taxpayer gift to SingTel-Optus,” he said. Telstra’s Chief Executive Officer, Sol Trujillo, thanked Dr Burgess for his enormous contribution to Telstra over the past three years.

“Phil Burgess has prosecuted Telstra’s interests passionately and with great effectiveness since his arrival three years ago, and I pay tribute to his extraordinary leadership and commitment,”

Mr Quilty said. “Telstra will continue to put the interests of its shareholders, customers and employees first and foremost both publicly and in our dealings with all stakeholders.”

Dr. Burgess, who will serve as a consultant to Telstra and advisor to the CEO, will return to The Annapolis Institute in September where he will resume research, writing and speaking on issues

related to technology and society. He has also been appointed as a Senior Fellow at the Center for the Digital Future at the Annenberg School for Communications at the University of Southern California in Los Angeles, where he will address the impact of the Internet and advanced communications technologies on consumer behaviour, business practices and community development in the US and around the globe.

Retravision Doomed Say Vendors

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Retravision is doomed say several CE Vendors with Narta the consumer electronics and appliance buying group for David Jones, JB Hi Fi, Bing Lee and several other leading retailers set to be bolstered by the sale of Retrovision’s largest retailer RT Edwards of South Australia to Radio Rentals.

 

Industry insiders say that he move to Narta who are responsible for buying over $ 3.3 billion dollars worth of goods will cripple Retravision and could well force the closure of other Retravision stores due to a lack of buying power.

During the past 18 months Retravision has reeled from one crisis to another.   In 2006 Retravision NSW was forced into administration. Also in 2006 Narta acquired Sydney based Whitfords. Also joining the buying group that year was Coffs Harbour based Morrison Electrical who deserted Retravision after more than 40 years.

Kay Spence the CEO of Narta told ChannelNews that she is currently in New Zealand and that while the Radio Rentals business will bolster Narta buying power, she was not in a position yet to comment on the issues affecting Retravision.

Several vendors who ChannelNews have spoken to today have said that they believe Retravision is doomed. “The insurance Companies are worried and we for one are reviewing our terns” said a major TV vendor.

An appliance vendor said “We don’t like kicking someone when they are down but the writing is on the wall. Narta are a very strong, well-run group and from here on in they look like getting stronger”.

A senior JB Hi Fi executive said “he fact is that both here and around the world,  the big electronics retailers are getting bigger and the small are just falling by the wayside”….many years ago when we started in this business, Retravsion was bigger than Harvey Norman, but that situation has well and truly reversed itself….it does put a lot of pressure on Retravsion and their business model”

Overall, looking at the sales figures, which i believe was quoted at around $100 million, it wont have a great impact- maybe it might for NARTA, but not for the overall sector..it sill have an insiginicant affect on the total market”.

“As for JB HiFi, we really don’t compete with them, so it wont affect us at all”.

 

More to follow.

Consumer Technology A Big Winner For Woolworths

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Woolworths has cranked up their consumer electronic operations in an effort to capitalise on the growth being recorded by most CE retailers. In their latest report to the ASX Woolworths has recorded consumer electronic sales of over $400 million for the first quarter of FY09

 

Their success follows a major restructuring of their Dick Smith operations. However Woolworths have warned that the Australian market is slowing.

In the 14 week period ending 5 October 2008, Woolworths CEO Michael Luscombe said that CE sales had increased when compared with the same period last year.

“This is a good start to the financial year and particularly pleasing is the continued momentum in our Australian operations, with an overall improvement in comparable sales growth.” Luscombe wrote.

Consumer electronic sales increased from $365 million for Q1 FY08 to $408 million for the first quarter of this current financial year a growth of 11.8 per cent year on year.  Last year sales grew from $347 million to $368 million, a $21 million or 6.1%.

“Consumer electronics has continued to enjoy solid growth with sales for the quarter increasing 6.1%. Comparable store sales increased by 4.9%…during the quarter, an improvement on the 3.8% recorded in the fourth quarter of 2008, reflecting an improved result from our Australian operations,” wrote Luscombe.

 

Overall Woolworths saw sales growth accelerate to 9.6 percent in the first quarter as food and liquor sales withstood slower consumer demand, and it maintained its full-year sales outlook.

Sales growth rose from the 7.5 percent reported in the fourth quarter, boosted by store refurbishments, the company said.

Woolworths Chief Executive Michael Luscombe said that subject to the uncertainty about discretionary spending, full-year sales growth would be in the upper single digits, as previously forecast.

Consumer spending in Australia has slowed sharply this year, but economists say there are signs confidence improved after the central bank unexpectedly slashed official interest rates by 1 percentage point this month in response to the global financial crisis.

Woolworths’ same-store sales in Australian food and liquor rose 6.0 percent, up from 4.9 percent in the fourth quarter.

Dollar And Shares Surge As Distributors Roll Out Price Rises

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Only days after the Australian dollar plunged to new lows, distributors have started to roll out prices in a move that could impact the specialist channel. The prices come as both the dollar and Australian shares rise in early trading.

Hills SVL the distributor of Crestron has jacked up prices by up to 12%. The move will impact installers who have quoted jobs but not purchased the automation gear needed finish an installation.


International Dynamics has lifted the price of their Rotel range of products by up to 25%.


In a statement issued today Hills SVL said “Due to the continued fall in the value of the Australian Dollar against most major currencies, we will be issuing new price lists effective November 3rd 2008. The level of the price rise varies between around 7% and 12%, depending on the brand, supplier price increases and the currency in which we purchase”
The Company went on to say “Any current quotes will only be valid until October 31st 2008”.


Earlier today Australian stocks soared after dramatic moves at home and abroad over the weekend to shore up financial confidence and thaw the global credit system.

In early trade, the benchmark S&P/ASX 200 index rose as much as 5.8%, or 229.3 points, to 4190.0.
The Australian dollar leapt in early trading, gaining more than 4% to 68.07 US cents. It jumped 3.7 yen, or 5.6%, to buy 68.77 yen

Myer Profits Increase 40% Expanded CE range

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Department store group Myer who have cranked up their consumer electronic offerings of like to compete head on with the likes of Harvey Norman and JB Hi Fi have delivered a 40% increase in net profits.

Department store group Myer who have cranked up their consumer electronic offerings of like to compete head on with the likes of Harvey Norman and JB Hi Fi have delivered a 40% increase in net profits.

The group has also forecast improved profitability by mid-2010. In their latest report My have net profits for fiscal 2008 of $93.579 million, up from $73.432 million in the prior year.

The profit increase comes despite a downturn in revenue from $3.002 billion last year to $2.94 billion this financial year. However the cost of doing business fell 2.8 per cent to $1.057 billion .

Myer claim that despite  tough market conditions they would continue, with good profits in 2009 due to cost cutting and better buying procedures and that they are “on track to deliver improved profitability with (earnings before interest and tax) of seven cents in the dollar by mid-2010”.


According to AAP Myer Group executive chairman, Bill Wavish, said the company considered its financial performance as “solid”.”Cash flow and profitability have both improved, providing us with a stronger platform for capital investment in the business,” Mr Wavish said. “Debt has also reduced, with our next repayment four years away. “Despite current difficult retail trading conditions, we are on track to achieve the economic performance to underpin long term sustainable investment and growth.

“By mid 2010, the end of the Turnaround Phase and the beginning of the Growth Phase, we would expect to be earning over seven cents in the dollar.” He added “Given the prevailing economic conditions and the impact on earnings of current refurbishments, our expectation that fiscal 2008 profits can be maintained in fiscal 2009 reflects our confidence in the underlying business, including our ability to continue to drive business improvements.”

Qantas Bans Mile High Porn Thrills

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Qantas been sucked into an American airlines porn row with the Aussie icon now banning live internet access on their A380 planes.

Qantas been sucked into an American airlines porn row with the Aussie icon now banning live internet access on their A380 planes.

Instead Qantas will deliver a cached service after it was revealed that customers on American Airlines were accessing porn sites much to the angst of flight attendants and other American airline passengers.

American Airlines, started offering passengers full in-flight broadband internet access on its Boeing 767-200 planes for $US12.95 a flight in August and within days the log files revealed that one of the hottest categories accessed was porn sites.

According to the SMH a Qantas spokeswoman said the internet plans had been paired back due to “logistical and regulatory issues” encountered by its connectivity provider, OnAir. The airline said the full internet service was now scheduled to be available “later in 2009”.

Qantas has also said that they will launch new technology on its domestic fleet which allows customers to access in-flight SMS and email from their mobile phones. International Qantas customers will also able to book their seat and issue a boarding pass from their office or home.

Qantas To Merge With British Airways

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Only days after Geoff Dixon retired as CEO of Qantas CNN has reported that Qantas is set to merge with British Airways a former major shareholder in the Australian airline.

CNN is reporting that British Airways has said  it was in talks with Australian rival Qantas that could see a merger of two of the world’s most prestigious airlines.

BA says it is in talks with Australian rival Qantas.

BA says it is in talks with Australian rival Qantas.

London-based BA said the exploratory talks would look at creating a dual-listed company but offered no other details.

“There is no guarantee that any transaction will be forthcoming and a further announcement will be made in due course if appropriate,” BA said in a statement.

BA said the talks would not affect its negotiations in Spanish airline Iberia, with which it opened merger talks earlier this year. 

The tech savvy airline British Airways has a lot to gain from a merger with British Airways analysts are reporting as both airlines have significant investments in providing services between Europe and Australia.

Now under the leadership of Irishman Alan Joyce the former CEO of budget airline Jetstar the merger comes at a time when the Australian dollar is $0.63 to the US dollar.

Earlier today Reuters reported that Qantas will remain majority Australian-owned and Singapore Airlines  will stay shut out of lucrative Australia-U.S. routes under a new government aviation blueprint.

A discussion paper for the industry, to be released on Tuesday by the government, would keep the existing cap on foreign ownership of Qantas at 49 percent, Transport Minister Anthony Albanese told state radio.

“The 51 percent Australian ownership is maintained under the Qantas act. We think there should be a level playing field apart from that,” Albanese said.

The Australian newspaper said the proposals also include removing a 25 percent limit on individual foreign shareholdings in Qantas and a 35 percent total limit on foreign airlines’ holdings in the carrier,

More to follow.

CE Advertisers Move Online

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Vendors, retailers and distributors of consumer technology are turning to online marketing due to the sheer volume of consumers who search for goods and services online say Price Waterhouse Coopers.

Vendors, retailers and distributors of consumer technology are turning to online marketing due to the sheer volume of consumers who search for goods and services online say Price Waterhouse Coopers.


They also report that Internet ad revenues rose 11% in the third quarter from the same period a year ago, and 2% from the second quarter. The research was conducted in partnership with the Internet Advertising Bureau (IAB).
In both Australia and the USA online ad revenue have risen significantly as advertisers search out niche markets and easy measurement of their campaigns.


During the past 12 months web sites like SmartHouse and ChannelNews which are independently measured by both Nielsen Digital and Google Analytics have witnessed significant growth. SmartHouse has grown by 18% to over 3,500,000 unique visitors this year to date. ChannelNews which is a trade only web site has risen by 14%.


“The growth of interactive advertising that we’ve been experiencing over the past few years has stabilized due in large part to the difficult current economic climate,” said Randall Rothenberg, president and CEO of the IAB.


David Silverman, a partner at PricewaterhouseCoopers.” The Internet should be better poised to withstand the current economic storm given its ability to combine performance-based advertising along with broad-based branding.”

Clive Peeters CEO On Growth New Web Site & Expanded Marketing

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Retailer Clive Peeters is out performing the market. They are also is set to crank up their catalogue marketing, roll out a major new online initiative and expand their service offering claims their CEO.


According to Company CEO Greg Smith the consumer electronics and appliance retailer is currently outperforming the market with growth in October of 17% vs. an industry average of 7%  he also said that during the past two weeks the Company has witnessed “excellent traffic through their stores and an exceptional week last week”.


“We have deliberately expanded the amount of catalogues we are doing. Where we normally do 1 or 2 a year we are going to do 3 between now, Xmas and into the New Year”.

 
Last week the retailer announced that they had called in KPG to conduct a strategic review of their operations however Smith refused to get drawn on whether this was a move to rationalise the sale of shares in the Company in an effort to raise additional capital.


He said that recent reports on Current.com.au that the Company has identified sites for up to 100 stores nationally over the next 10 years were wrong.


“What we have is an aspiration to open 100 stores. This will depend in part on the future direction of the Company and the work being done by KPMG. Currently we are working closely with vendors to grow our business. Recent research indicates that 94% of people who shop in a Clive Peeters store will come back and shop again. What we have to do is improve the traffic coming through the door as we have a superior service offer than our competitors and we give a 14 day price guarantee”.

 


He added” The average sale in a Clive Peeters store is $800 compared to $80 in JB Hi Fi and going forward we believe that we can grow our customer base because we have a superior service and support offering, this is key to our success. We have been watching the Best Buy model for several years and their service operation is a key part of their model”.


“We have spent significantly in merchandising our stores and when a customer walks into a Clive Peeters store they will get exceptional service and we will not be beaten on price as we will not only match a competitor’s price but give a 14 day guarantee” said Smith.


When it was put to Smith that his stores were more like a David Jones department store than a Harvey Norman or JB Hi Fi discount store he said “We have invested in giving the consumer an excellent in store experience. However we are getting more aggressive with our marketing going forward. We are expanding our catalogue offerings and you will see more price promotions in our advertising. The market right now is tough but over the past few weeks we have hit some good trading numbers ahead of what we expected. Tax breaks are tipped, interest rates are coming down and Ist home rebates are now flowing into the market. We are confident that consumers will spend and while it will not be a bumper Xmas we believe it will be a solid Xmas”.