Has JB Hi-Fi Lost Its Point of Difference?

RO
Robbo
Robbo
Not Invested
Community Contributor
Published
04 Aug 25
Updated
04 Aug 25
Robbo's Fair Value
AU$76.00
53.2% overvalued intrinsic discount
04 Aug
AU$116.41
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Author's Valuation

AU$76.0

53.2% overvalued intrinsic discount

Robbo's Fair Value

I may be showing my age here, but I feel that a decade or so ago, shopping at JB Hi-Fi was a different experience. There seemed to be a deliberate policy of employing sales staff from alternative subcultures, which gave the stores a unique, edgy vibe. While the handwritten advertisements on butcher’s paper are still there, they don’t seem to have the same character they once did. Perhaps it’s just me and the novelty has worn off.

JB has embraced online sales, and maybe as a result, has shifted focus from in-store experiences to digital platforms. The move away from DVDs, CDs, and physical media to streaming services has also forced JB to pivot towards hardware sales. This change likely necessitated a shift in staff expertise, which may have inadvertently altered the store culture. Despite the name, the business has lost some of its original emphasis on high-fidelity audio and visual products.

That said, JB Hi-Fi remains a household name in Australia. The acquisition of The Good Guys has cemented its dominant position in the appliance retail space. Its stores have a smaller footprint than major rival Harvey Norman, resulting in higher sales per square metre. JB is also known for its lean operations—impressive in an industry characterised by low margins. A return on equity (ROE) of around 28% is remarkable in this context. The company also has a track record of buying back shares, signalling that management maintains confidence in the business.

In terms of valuation, JB appears fairly priced for what it is. Across multiple metrics, it seems reasonably valued and has maintained a dividend yield above 5%. While the company carries some debt, this appears to be well covered by its income. Margins remain tight, but this is a structural characteristic of the retail sector rather than a company-specific issue.

Quantitatively, there’s nothing glaringly wrong with JB Hi-Fi.

However, challenges remain. Pure online retailers like Amazon and Kogan continue to squeeze margins in an already competitive market. Streaming services have also diminished the relevance of JB’s traditional media sales. Personally, I’ve considered going back to buying physical copies of my favourite movies, TV shows, and albums to avoid the whims of streaming contracts—but in practice, I haven’t done so yet.

International competitors are increasingly entering the Australian market, while JB itself has no overseas presence. Domestically, it’s approaching market saturation, unless it actively seeks to take share from competitors.

It feels as though JB Hi-Fi once occupied a distinct niche—selling physical media in a fun, alternative retail environment. As the company has scaled up, it has inevitably become more corporate, competing directly with broader appliance retailers. In this evolution, has JB lost its “high fidelity” culture? Its point of difference may have evaporated as it adapted to changing market realities. The question is, does that now make it just another appliance retailer?

While I’d like to see JB recapture some of its original identity, I’m not convinced that would make good business sense in the current environment. Fundamentally, there are no immediate red flags with the company—but at the same time, I’m not rushing out to buy it either – this indifference may also be symptomatic of its changing culture, which is sad.

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Disclaimer

The user Robbo holds no position in ASX:JBH. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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