JB Hi-Fi group CEO Richard Murray intends to be the “last man standing” in physical software as sales in one of the company’s ‘DNA categories’ continue to fall.
Yesterday JB took a 15.99 per cent lift in first-half net profit to the ASX, sending the company’s stock up seven per cent on market opening, but underneath the headline figure was a 9.4 per cent decrease in software sales.
The figure is representative of the continued decline of the category and comes on top of a 5.4 per cent decrease in software sales last financial year as consumers continue to gravitate towards digital consumption of movies, music and games.
Software still represents over 13 per cent of JB’s overall sales though, and Murray says the company continues to handle the product transition towards home appliance categories well.
“We were pleased with our results in software,” Murray told Inside Retail. “It’s relative, what JB has done really well is manage the transition of those products through the business.”
The shift has seen JB make software a shrinking part of their floor space in stores over the last few years, reallocating space to new growth channels like small appliances – which alongside communications, audio, cameras, accessories and computers drove a 12.6 per cent sales bump for the half.
“We want to be the unassailable destination for physical music, movies and games and we still think that while the market isn’t growing that it’s still a meaningful market and we have the opportunity to be the last man standing,” Murray explained.
The continued focus will see JB prioritise the inclusion of small appliances in the three stores they plan to open in the second half of FY17, as talks continue with Home Consortium – the recipients of Masters’ sites – on new large format space for the group.
“We are working with the home consortium, but the devil is in the detail,” Murray said. “It’s trying to find the right opportunities and where we fit in the overall layout of the centre.”
“There are different retailers and they are trying to make it work as well, it’s a very, very complex project.”
Both JB Hi-FI and The Good Guys are slated to take space in the Home Consortium venture, which has previously been revealed as a self contained centre format which will provide tenancies for several retailers.
The move would likely see JB positioned alongside its recent acquisition, which the company has begun fully integrating now that Christmas trading has concluded.
Murray said the process of generating the $15-20 million in synergies from the acquisition over three years is well underway, but that full integration could be a 5-10 year process.
“It’s a long journey, some things are like IT systems are 5-10 year investments,” he said. “There are things that we will run separately today that we might, over time, see the opportunity to combine.”
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