Consumer electronics retailer, JB Hi-Fi Limited (ASX: JBH) has today announced that it is moving into selling fridges, small appliances, ovens and cooktops.
JB Hi-Fi is launching what it calls “HOME” concept stores as part of a six-month trial. The superstores are currently located at the company’s existing larger homemaker centre sites, where it sees HOME as a logical extension to its current entertainment categories. JB Hi-Fi is looking to capture some of the $4 billion home appliances market, but it’s going into a tough industry with some tough competitors, including Harvey Norman Holdings (ASX: HVN), even Thorn Group’s (ASX: TGA) Radio Rentals and a host of online players.
JB Hi-Fi will conduct the trial in Queensland with the rebranding of four Clive Anthonys homemaker stores, followed by another two in the New Year, which will allow the company to test the concept, but also to ensure it doesn’t damage its existing brand. The company is also launching a dedicated e-commerce site allowing customers to both research and buy online.
The move raises concerns that the company’s existing consumer electronics business may be faltering and the company may be looking for other growth avenues. Of course, it could also be a strategic long-term move, which may put more pressure on many whitegoods retailers, like The Good Guys, Bing Lee and Retravision, as well as smaller independents.
Chief executive Terry Smart has said that whitegoods hadn’t experienced the same sort of price deflation as the consumer electronics sector.
The market didn’t like the move much, sending JB’s shares down 5.5% to $10.10, with investors apparently seeing it as a high risk play. JB Hi-Fi may not be able to source its products cheaply enough because it’s only a small operation and not buying in bulk, and therefore unable to compete against the likes of Harvey Norman. Then again, JB Hi-Fi may be content to wear any initial losses in the short term, as it builds scale and converts/rolls out more stores.
The Foolish bottom line
JB Hi-Fi makes much of its low cost of doing business, and this may stand it in good stead against its competitors. This move is also a way of removing the Clive Anthonys brand – which Mr Smart suggests has been associated with failed retailer, Clive Peeters. JB Hi-Fi has a good track record of entering new sectors, seeing off its competitors and becoming one of the market leaders. Whether whitegoods and appliances will achieve the same result remains to be seen.
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Motley Fool writer/analyst Mike King owns shares in JB Hi-Fi. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.