JB Hi-Fi is the retailer considered most likely to be able to withstand a prolonged decline in discretionary spending due to rising petrol and food prices.
After years of inactivity, consumers are now facing higher prices for various items.
The rise in petrol prices will have a significant impact on household budgets. It will cost them around $30 a week and will affect almost every household in Australia.
JP Morgan, has identified JB Hi-Fi and Premier as the retailers that can weather the storm.
JP Morgan says JB Hi-Fi is well-equipped to handle the volatile trading environment. It has a well-diversified business model and is adapting to the changes in the market. They believe that working from home is here to stay and that consumers will eventually upgrade their home offices to accommodate more devices.
Despite the current environment, JB Hi-Fi is well-positioned to continue growing due to the replacement cycle.
Despite the disruption caused by the COVID-19 phenomenon, JB Hi-Fi’s sales in Australia increased by 4.3 percent in January.
The Good Guys, an electronics and appliances retailer, saw its sales increase by 2.5 percent in January.
Under JB Hi-Fi’s ownership, The Good Guys has shown significant improvement in its merchandising and inventory management.
It is expected that the company’s EBIT margin will increase to around 6 percent over the next three years due to the improved quality of its business. He attributed the company’s improved performance to the improved quality of its operations.
The rapid growth of online sales has created various opportunities for retailers, but it has also caused them to face challenges due to the lower margins.
JB Hi-Fi’s ability to pivot its business model online is significant given the varying profitability of different retailers.
The grocery category has a high picking cost, which is around 7 percent of the basket size. This is almost triple the cost of an electronics category.
Other stores considering to do well during high inflation includes City Chic. They have a good online business model and with a City Chic promo code, you can save on your purchase at City Chic.