JB Hi-Fi Surges After Profit Forecast Beats Estimates

JB Hi-Fi Ltd., Australia’s second-largest electrical retailer, led gains among consumer discretionary stocks with the biggest surge in four years after forecasting full-year profit higher than analysts’ estimates.

The stock jumped 17 percent at A$12.89 at the close of trade, the most since February 2009. Larger rival Harvey Norman Holdings Ltd. climbed 5.9 percent to A$2.33, the biggest gain in 18 months. Consumer discretionary stocks were the best performers in the benchmark S&P/ASX 200 index today.

JB Hi-Fi’s first-half net income came to A$82 million ($84 million), the Melbourne-based company said in a statement today, compared with the A$75 million median estimate of seven analysts surveyed by Bloomberg. Australian electrical goods sales struggled over the past year as the strength of the nation’s dollar pushed down selling prices of imported products while weak consumer sentiment kept a lid on demand.

“The discounting activity we saw a year ago was predominantly due to inventory clearance, and was very irrational and short-term,” Andrew McLennan, an analyst at Commonwealth Bank of Australia who rates JB Hi-Fi neutral, said by phone from Sydney. “Maybe we all got a bit too carried away on the downside because of what turned out to be a short-term characteristic.”

Full-year net income will be between A$108 million and A$112 million, JB Hi-Fi forecast today, above the A$103 million average of 14 analyst estimates compiled by Bloomberg.

Gross margin -- the gap between the prices that stores buy and sell goods -- widened 0.3 percent and will continue to improve after a period of heavy discounting last year, the company said.

Myer Gains

Sales at JB Hi-Fi grew 2.3 percent to A$1.82 billion, while those from stores open at least 12 months fell 3.5 percent, the company said. Televisions, which the company said were declining in price by as much as 25 percent in a December 2011 trading update, were still a drag on sales growth, Terry Smart, chief executive officer, said in a statement today.

The end of discounting for inventory clearance should benefit Harvey Norman, Commonwealth’s McLennan says. Australia’s largest electrical chain by sales is due to report earnings on Feb. 28.

“Conditions remain tough,” he said, “but that discrete period of inventory liquidation has completed.”

Myer Holdings Ltd., Austalia’s biggest department store operator, rose 3.1 percent to A$2.67 and second-ranked David Jones Ltd. gained 2.7 percent to A$2.70.

The benchmark fell 0.2 percent today while the 26-member S&P/ASX 200 Consumer Discretionary index rose 1.5 percent.