JB Hi-Fi Limited (ASX: JBH) is expected to pick up around $200 million in new sales following the collapse of rival consumer electronics retailer Dick Smith earlier this year.
Speaking at the annual Stockbrokers Conference in Melbourne today, CEO Richard Murray is reported to have taken a stick to the Dick Smith model, and accused management of an unsustainable retail model.
According to The Australian, Mr Murray says Dick Smith tried aggressive discounting on Apple products and Sony PlayStation 4 gaming platforms that failed to win the long-term loyalty of its customers.
Mr Murray says there were early warnings of the group's collapse in its approach to fire sales.
"They did a $400,000 deal with eBay that torched the market price of the PS4. That's not what we do, anyone can do a fire sale, it's very easy to do," he said.
"Dick Smith moved a lot of product, customers are very savvy…but I'm not sure it actually helped anything long term for the business around the challenges they had such as customer equity. They were very aggressive on Apple and the problem they found was when they turned that aggressiveness off it hadn't built the customer equity and therefore their sales declined."
JB Hi-Fi is expected to make a bid for another competitor The Good Guys, in competition with Harvey Norman Holdings Limited (ASX: HVN), but is keeping quite about the deal so far.
The consumer electronics retailer has seen its share price rise more than 18% so far this year, compared to the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) rise of just 0.3%, on the back of the demise of Dick Smith, the potential bid for The Good Guys and a decent first half result.
Net profit was up 7.5% as revenues reach $2.1 billion for the six months to end of December 2015. JB Hi-Fi expects net profit to be in the range of $143 to $147 million for the full year, but could beat that if Mr Murray is right about the additional sales flowing from the demise of Dick Smith.
Foolish takeaway
JB Hi-Fi has been written off many times in the past but has shown repeatedly that it has the ability to survive and even prosper. It looks like the company has become that little bit stronger with Dick Smith no longer around.
