JBHIFI Accounting
Executive Summary
This report is an analysis of 2 companies: JB Hi-Fi and David Jones for the purpose of making a sustainable long term investment in either company.
The analysis that was undertaken includes understanding the history, current operations and differences between both companies. While both operate within the Australian retail sector, JB Hi-Fi is a speciality discount retailer of branded home entertainment products and David Jones is an upmarket department store chain with a diverse offering including cosmetics, fashion, home wares, furniture, electrical, food and toys.
To add context to the operations of both companies, analysis was undertaken to understand the retail sector within Australia as well as influences of local and global economic conditions such as the impact of the Global financial crisis, movements in the Australian dollar and consumer confidence.
The financial statements for both companies from 2008 were examined to understand the financial performance of the companies looking at key decisions made or events that have occurred over these periods and their implications on the profitability, operating efficiency, liquidity and financial risk for both companies.
Key highlights included the decision by David Jones to reduce risk by outsourcing their accounts receivables to American Express as well as more recently outsourcing their electrical departments to Dick Smith and efforts to reduce excess inventory in recent periods. JB Hi-Fi’s continued its rapid store expansion, acquisitions and investment into other businesses as well as implementing a strategy to pay down debt before initiating a share buy back in 2011 increasing shareholder value.
Following this analysis it was determined that while the recent performance of JB Hi-Fi is attractive there are warning signs of a possible burn out with costly investments into rapid store openings and closures and diversification into new segments such as whitegoods and online music, hence
This report is an analysis of 2 companies: JB Hi-Fi and David Jones for the purpose of making a sustainable long term investment in either company.
The analysis that was undertaken includes understanding the history, current operations and differences between both companies. While both operate within the Australian retail sector, JB Hi-Fi is a speciality discount retailer of branded home entertainment products and David Jones is an upmarket department store chain with a diverse offering including cosmetics, fashion, home wares, furniture, electrical, food and toys.
To add context to the operations of both companies, analysis was undertaken to understand the retail sector within Australia as well as influences of local and global economic conditions such as the impact of the Global financial crisis, movements in the Australian dollar and consumer confidence.
The financial statements for both companies from 2008 were examined to understand the financial performance of the companies looking at key decisions made or events that have occurred over these periods and their implications on the profitability, operating efficiency, liquidity and financial risk for both companies.
Key highlights included the decision by David Jones to reduce risk by outsourcing their accounts receivables to American Express as well as more recently outsourcing their electrical departments to Dick Smith and efforts to reduce excess inventory in recent periods. JB Hi-Fi’s continued its rapid store expansion, acquisitions and investment into other businesses as well as implementing a strategy to pay down debt before initiating a share buy back in 2011 increasing shareholder value.
Following this analysis it was determined that while the recent performance of JB Hi-Fi is attractive there are warning signs of a possible burn out with costly investments into rapid store openings and closures and diversification into new segments such as whitegoods and online music, hence