JB Hi-Fi Limited (JBH) Earnings Call Transcript & Summary

Good morning, and welcome to the JB Hi-Fi Group 2026 Full Year Results Investor Conference Call. Today's call will commence with a short presentation from JB Hi-Fi's Group CEO, Nick Wells; and Group CFO, David Giansalvo. Following the presentation, we will open to questions from investors with a limit of 2 questions per investor and the call will conclude around 11:30 a.m. We welcome representatives of the media to this call. And as with previous calls, remind you, we will only be taking calls from investors. I will now introduce and hand over to JB Hi-Fi's Group CEO, Nick Wells.

Thank you. Good morning, everyone. Thank you for joining us. And as always, thanks for your interest in the business. We will talk through the presentation and then allow some time for questions. So by starting, I'll turn to Slide 4, titled Group Model. Most of you will be familiar with this slide, so I'll quickly summarize it. We have 3 great brands that are all very complementary, JB Hi-Fi, the Good Guys and our most recent addition, e&s. Each brand has its own purpose and a clear focus on specific categories and segments. JB is known for technology and entertainment. The Good Guys is a leader in home appliances, particularly entry to mid-market products and with the replacement customer, while e&s is dominant in premium home appliances and bathroom products with a strong focus on the renovation and construction markets and primarily in Victoria today. All of our brands go to market across multiple channels with stores, online, over the phone, chat and commercial. And our value proposition in each brand is simple, the best brands, a big range and low prices. We are absolutely known and trusted for value. And with our passionate and knowledgeable team members, we consistently deliver exceptional customer service. All of this is supported by our key competitive advantages, which I'll talk to on the next slide. So turning to Slide 5 and our 4 key competitive advantages and just some key callouts. Firstly, scale and diversification. We have strong and engaged supplier relationships, both globally and locally that recognize our scale. We have a large, engaged and diverse customer base and high-traffic stores and websites, which provides significant marketing opportunities and reach. Our multi-brand approach provides us the ability to have diverse and differentiated offers with a wide range of categories and different go-to-market approaches. Secondly, our low-cost operating model. We have a constant focus on productivity and minimizing unnecessary expenditure, and we are the lowest cost operator in our categories. The efficiency that we get through this model allows us to maintain low prices and drive value for our customers. Third, multichannel, which is fundamentally about giving customers absolute choice on how they wish to shop with us. Our stores provide easy access to customers to transact, but are also destinations for discovery and advice. Online is used for both research and convenience purchasing and phone and chat gives customers who are not in the store, the ability to access staff knowledge and advice along with price negotiability. And lastly and importantly, people and culture. Our knowledgeable and passionate team members provide exceptional customer service. Our dynamic and flexible model allows the business to pivot quickly and adapt to any changing market conditions. Turning to Slide 6. We have today released our FY '26 Responsible Business Report, which was previously called our sustainability report and outlines our commitment to having a positive impact on our people, communities and environment and generating long-term sustainable growth. For our people, we are focused on supporting them and ensuring a safe, inclusive and respectful workplace whilst always looking for ways to provide our team members with flexibility and opportunities to grow and develop. For our communities, we seek to make a positive impact in the communities where our team members live and work and to work with our supplier partners to protect and further human rights. And for the environment, we are committed to minimizing the impact that our operations may have on the natural environment and proactively reducing our waste and emissions. We are making some really great progress on our initiatives with examples like 68% of our energy now coming from renewable sources and recycling 12,000 tonnes of e-waste in the last 12 months. I'd encourage you to read the report to get a full update. Now turning to the group FY '26 performance and starting on Slide 8. We will talk to the results in more detail as we move through the presentation, but we are pleased to report record sales and solid earnings for FY '26. In a retail environment where customers are seeking value, our brands continue to resonate and our teams continue to execute to a high standard. Total sales exceeded $11 billion for the first time, up 4.8% on FY '25 to $11.06 billion. EBIT was $734.4 million, up 3.8% on FY '25 underlying EBIT and up 5.8% on FY '25 statutory EBIT. EPS was $4.481 per share, up 2.9% on FY '25 underlying EPS and up 5.9% on FY '25 statutory EPS. And we today declared a final dividend of $1.27 per share, up $0.22 per share or 21%, bringing the total dividend for FY '26 to $3.37 per share, up $0.62 per share or 22.5% and representing 75% of NPAT. We will take Slide 9 as read and turn to divisional performance, starting with JB Hi-Fi Australia on Page 10. So on Slide 10, in what has been a unique period for the technology categories with significant supplier price rises and availability challenges, we were pleased to report growth in sales and earnings in JB Hi-Fi Australia. I'll turn to Slide 11 and cover in greater detail. Total sales increased by 4.4% to $7.42 billion with comparable sales up 3.2%. From a category perspective, it was a good year for computers with growth across a number of key brands and good results from our AI-enabled PCs and gaming PCs. Mobile phones continue to perform well with growth both in units and in ASP driving sales growth. Within fitness, wearables continue to perform strongly, but we've also seen successful results from our newly expanded health and well-being categories. In small appliances, the momentum remains strong with lots of innovation. Coffee, robotic vacuums and kitchen appliances all performed well as did our expanded personal care categories. Our IT category saw strong sales growth, particularly in the second half with customers responding well to new products. Online sales increased by 7% to $1.28 billion or 17.2% of total sales. Sales growth in Q4 was impacted by supplier price rises and stock availability shortages in some of the key tech categories, along with cycling the Nintendo Switch 2 release in the prior year. Gross profit increased by 4.2% to $1.63 billion, with gross margin down 5 basis points to 21.94%, driven by sales mix. This was a solid result in a competitive environment. Cost of doing business was 12.46%, up 4 basis points and in absolute terms, grew 4.8% with continued cost control and investment in new stores and strategic initiatives. EBIT increased by 3.2% to $547.3 million, with EBIT margin down 9 basis points to 7.38%. Over to Slide 12 and JB Hi-Fi New Zealand performance. It was pleasing to see our performance improve in New Zealand and to record strong sales and earnings growth, having been investing in growing the business in the New Zealand market over the past few years. I will turn to Slide 13 and cover in greater detail. Total sales increased by 26% to NZD 499.5 million, with comparable sales really pleasingly up 15.3% as the business continues to resonate with customers and expand its reach. Like Australia, results from mobile phones, computers and small appliances have been strong. In audio, we are doing well in headphones, sound bars and party speakers, while games hardware benefited from a full year of the Nintendo Switch 2. Online sales increased by 36.7% to NZD 86.2 million or 17.3% of total sales. Gross profit increased by 29.1% to NZD 86.9 million, with gross margin up 41 basis points to 17.41%, driven by improvements in key product and services categories. Cost of doing business was 13.66%, down 106 basis points and in absolute terms, grew 17% with continued investment in new stores and strategic initiatives. Operating leverage from strong sales growth and disciplined cost control resulted in EBIT of NZD 4.1 million, up NZD 4.3 million, with EBIT margin up 88 basis points to 0.82%. Now turning to the Good Guys on Slide 14. It was a really pleasing result for Good Guys with strong execution by the team driving solid sales growth and strong growth in earnings. I'll turn to Slide 15 and cover in greater detail. Total sales increased by 2.7% to $2.94 billion with comparable sales up 2.7%. Portable appliances growth was led by continued innovation in the category and solid results in coffee. Floor Care continues to show strong growth, underpinned by growth in robotic vacuums. Cooking growth was driven by growth in in-built cooking and range hoods. Refrigeration growth was driven by consumers shifting into larger capacity models and audio also performed well, led by headphones. Online sales increased by 13.1% to $481.3 million or 16.4% of total sales. In a weaker home appliance market in Q4, the Good Guys continued to execute strongly and take market share. Gross profit increased by 3.9% to $698.9 million with gross margin up 27 basis points to 23.74%, driven by improvements in key product categories as we continue to grow. Cost of doing business was 14.25%, up 8 basis points and in absolute terms grew 3.3% with continued disciplined cost control. EBIT increased by 6% to $184 million, with EBIT margin up 19 basis points to 6.25%. Now turning to e&s on Slide 16. FY '26 in e&s has been heavily focused on integrating e&s into the broader group and investing in the systems, processes and capability to set the business up for future growth. I'll turn to Slide 17 and cover in greater details. In e&s, total sales for the 12 months to 30 June 2026 were $273.1 million. In FY '25, the group consolidated 10-month sales and as a result, on a statutory basis, FY '26 sales were up 21.3%. For comparative purposes, for the full 12 months, total sales were down 0.2% with comparable sales down 3.2%. Sales revenue has been impacted by the migration of wholesale sales to agency sales that for external reporting purposes are recognized as a commission only. Total sales on a gross basis were up on the prior year. Gross profit was $81.2 million with gross margin at 29.2%, up 117 basis points, driven by sales mix and the migration to agency sales. Cost of doing business was 26.15%, up 284 basis points, driven by investments in strategic initiatives, including in stores and the Commercial division, which are generating written sales growth that will be delivered and recognized in future periods. EBIT was negative $0.4 million as the business invests in strategic initiatives that are setting us up for strong growth over the coming years. I will now hand over to Dave for the balance sheet and cash flow.

Thanks, Nick. On Slide 19, the balance sheet and starting with inventory. Inventory was $1.36 billion, up 4.5% or $57.9 million year-on-year. Inventory turnover was down 24 basis points to 6.46x. Payables, which would ordinarily move in line with inventory, were down 5.2% or $46.8 million year-on-year as inventory in the technology categories was purchased earlier in Q4 to buy ahead of supplier price rises and to secure stock leading into the key June promotional period. As a result, net working capital was $160.8 million, up $85.2 million year-on-year. On Slide 20, highlights on the cash flow statement. Operating cash flows and operating cash conversion, whilst down year-on-year due to the increased working capital in June continue to be strong. CapEx was $87.4 million, up 6.4% or $5.3 million year-on-year with investment in the store portfolio, online and strategic initiatives. Dividends paid of $453.7 million, which is up $68 million year-on-year and results from the payment of the FY '25 special dividend that occurred in September and the increase to the dividend payout ratio for the interim dividend that was paid in March and represented 75% of NPAT. Net cash was $206.5 million with continued strong cash generation, offset by the increase in working capital and incremental dividends paid. On Slide 21, capital management. As announced in August 2025, from FY '26, the Board increased the dividend payout ratio from 65% to a range of 70% to 80% of NPAT. The final dividend announced today is $1.27 per share, fully franked, up $0.22 per share or 21%, bringing the total ordinary dividend for FY '26 to $3.37 per share, up $0.62 per share or 22.5% and represents 75% of NPAT. The record date for the final dividend is the 28th of August, with payment to be made on the 11th of September. The group continues to maintain a strong balance sheet, and this gives us additional flexibility to manage through the current operating environment. The Board will continue to review the group's capital structure with a focus on maximizing returns to shareholders and maintaining balance sheet strength and flexibility. I will now hand back to Nick to go through the group focus areas for FY '27.

Thanks, Dave. I'll now turn to the group focus areas on Page 23. We have 5 key areas of focus for the next 12 months, which will drive both short-term and long-term growth. These are retail execution, store growth, multichannel growth, supply chain and e&s expansion. I'll talk to each on the next slide. So turning to Slide 24, retail execution. In a competitive retail environment, our strong retail execution remains essential. We will continue to actively demonstrate and improve value to our customers and utilize our supplier relationships to access stock, create best-in-market promotions and win at key sales events. In an environment where we have seen significant supplier price rises, we'll use the breadth of our range, brands and price points to give customers choice to trade up or to trade down. We will keep our operating model simple and efficient, focusing on the metrics that matter like converting on our strong customer traffic, and we'll drive operational efficiencies and productivity with initiatives like electronic shelf labels to enhance our in-store experience and enable us to invest in customer-facing roles and in-store service for our knowledgeable, passionate team members. Turning to Slide 25. We'll continue to grow our store network with both new store openings and expansions in FY '27. In JB Hi-Fi Australia, we'll open 4 new stores, continuing our expansion into regional locations and relocate 1 store. In JB Hi-Fi New Zealand, we'll open 2 new stores and relocate 1 store. And in the Good Guys, we'll open 1 new store and relocate 5 stores and extend 2 stores to rightsize previously undersized stores and grow our available selling space. Moving to Slide 26 and multichannel growth. We'll continue to strengthen our multichannel capability, leveraging our significant online and in-store traffic. We'll grow our online phone and chat sales to meet customers' changing shopping needs, evolve our websites with expanded Agentic commerce experiences that will include natural language product search and agent-based shopping experiences and expand our marketplace offer. Our membership programs will remain a focus, delivering personalization at scale. At the same time, we'll ensure consistent customer experiences across all touch points and stay connected with shoppers however their shopping journeys evolve. We will grow our commercial business and expand our retail media network, providing more options for our partners to leverage our strong online and in-store traffic to create unique multichannel advertising experiences. Turning to Slide 27 and supply chain. Our investment in building and maintaining a fit-for-purpose supply chain network is ongoing. We will continue to focus on delivering best-in-class delivery options for our customers across all of our channels and leverage our new transport management system to improve the customer experience. We'll expand our big and bulky home delivery centers, starting with Melbourne to extend our range and maximize in-stock positions and also expand our HDC delivery network to open up big and bulky product range and depth to more regional customers. For peak this year, we'll expand our centralized online fulfillment and roll out semi-bulky store replenishment for high-volume lines for selected JB Hi-Fi, Victoria, New South Wales and Western Australian stores. And turning to the final focus area, e&s on Slide 28. We are investing in e&s for future growth, and we are really excited about the opportunity we have to grow e&s. It is a business that gives us access to expanded product categories and different customers, such as developers and large commercial builders that we don't cater for in JB and the Good Guys. We've made some key management appointments who bring significant industry experience and started building out our commercial team outside of Victoria. We've commenced work to migrate our website to Shopify, which will be completed in the second half of FY '27 and will significantly improve our online customer experience. In addition to the website, we're building our internal systems and tools to support our future growth. From a store perspective, we've developed a new store layer that reinforces the e&s experience, and we've started work on identifying potential new store locations to expand our reach. So now moving to Slide 30 and the group trading update. For the period 1 July to 31 July 2026, total sales growth for JB Hi-Fi Australia was negative 0.5% with comparable sales growth of negative 1.4%. Total sales growth for JB Hi-Fi New Zealand was 20.9% with comparable sales growth of 11.7%. Total sales growth for the Good Guys was negative 1.7% with comparable sales growth also negative 1.7% and total sales growth for e&s was negative 2.7% with comparable sales growth of negative 4%. We continue to see variability in trading with customers increasingly looking for value and migrating spending to key promotional events, noting that July isn't a big promotional period. In the technology categories, sales growth continues to be impacted by supplier price rises and stock availability. We expect the retail environment to remain uncertain in the short term. As we always have, we will continue to focus on driving demand and growing market share through creating great value offers for our customers, leveraging our strong supplier relationships to maximize stock allocations and delivering exceptional customer service. Over now to our investment checklist on Page 32. You will all know this well, so I won't go through it in detail. However, I will highlight a few points that will continue to drive our success. We're the scale operator and leader in our market with 3 unique and relevant brands that are known and trusted for value. We have a diverse and resilient product range from essential technology to replacement home appliances and continued product and category innovation. We have a flexible business model with a proven ability to adapt and grow and a very experienced management team. Thank you, and we will now open up to questions.

[Operator Instructions] Your first question comes from Shaun Cousins with UBS.

My first question is just around revenue, negative comps in JB Australia and Good Guys for July '26. That's the first period of negative comps you've done since 2014 ex sort of COVID period. How much of this was the tough macro, be it cost of living, higher interest rates, falling house prices post the budget versus how much of it was, I guess, rising computer chip prices there with elasticity somewhat of a new headwind and/or availability issues there? Just keen to sort of dig into what are the drivers of the negative comps for July, please, in your 2 main businesses.

Yes. Sean, look, it's a bit of a combination of everything. Yes, from a macro perspective, it has got a little bit harder. But like I said in my commentary, I think it is one month, and it is a small month. And I would say it's not a promotional period. And what we can see is that those promotional periods have become increasingly important when customers are looking for value. And so periods like end of financial year in June and Black Friday become really important and then maybe it touch a little bit out of those nonpromotional periods like July. So I think that's one component to it. We are -- in JB Australia, we are still seeing some sort of one-off type impacts from cycling. So there is a little bit of impact of cycling Nintendo switch 2 in the prior year in July as well, like there was in Q4. There's a bit of a change to timing of Samsung Fold release into August this year instead of July last year. And then it is the price rises and the availability, which are kind of impacting quite broadly. And it does vary depending on the supplier, but we have seen pretty material price rises. And post those price rises, we are seeing changes to the, I suppose, the frequency of promotional activity and changes to both the length and depth of some of that promotional activity. So that is also having an impact.

Great. Okay. Maybe just regarding sort of gross margins. You highlighted negative mix changes in the second half '26. Can you maybe sort of discuss sort of what they were? And then you've also sort of called out the risk to gross margins a little bit in July. There you sort of had customers looking for value migrating spend to promotional events and then I guess the consumer seeking sort of great value there. I'm just sort of keen to understand what the outlook for gross margins could be? And can you sustain the 22% gross margin that you've been able to achieve for a very long time?

Yes. I think it's -- like I said, it is a very value-driven market and it's very promotional and competitive. But I think as we've done well over an extended period of time, we've been able to manage it. And I think you can see in JB in Australia, we've consistently said it should be circa 22%. It's a little bit under over the course of FY '26, which is primarily driven by sales mix, and that is mix -- mixing more into some of the tech categories and probably a little bit weaker sales in a category like TV or some of the high gross margin categories. It's -- so I feel like we're managing it well, still feel confident that we can continue to compete, and we're pretty used to operating in a highly competitive environment. So from that perspective, okay. In FY '26, we have had a little bit of impact from -- again, as these price rises roll through from suppliers, we have a pretty efficient stock model and low weeks cover. So we typically got more of the newer stock at the higher price point compared to our competitors who might have the older stock at the cheaper price. So that, again, was something that was in there in the second half that we had to manage. But overall, confident in JB Australia that we can still sort of target that 22% gross margin. And then Good Guys, you can see the strong gross margin in Good Guys. The Good Guys team is doing a really good job of working with suppliers around leveraging our scale and making sure we're rewarded for our growth in what has been a tougher market in those home appliance categories.

Your next question comes from Adrian Lemme with Citi.

Just wanted to pick up on your comment there on TVs. We talked about 6 months ago that the comps were starting to get a bit easier in that category, but it doesn't seem to be turning around. Are you able to sort of talk a bit on that category, please?

Yes. Look, Adrian, it hasn't materially changed. To your point, we're starting to -- we are lapping easier comps in the category now. But it's -- when I look at our categories and look -- particularly look at the technology categories, I would say the TV category is probably one of the more discretionary categories. And so that, combined with not having seen a lot of innovation in the category, I'd still say it is one of our weaker categories at the moment.

Okay. And can I just ask a question about PCs? Our data suggests that volumes are down quite materially. So I guess you've got the ASP going up, but it sounds like the other issues that suppliers are maybe promoting this category less, so that's also impacting sales. Can you sort of talk to those dynamics, please?

Yes. Look it's -- if you look out over an extended period of time and over the last 6 months, we have seen very material price increases in PCs. In some brands, that can be in excess of 50% price rises. And as we talked about previously, like the major driver of that is the increases in cost of memory, and that is the demand for hardware used in the AI data centers is sucking up a lot of the memory supply. So memory prices have increased significantly, and that is driving costs higher for suppliers and making PC prices higher. We're not -- we're definitely not seeing ASP increases up at those levels as we're talking about. So we are -- the price rises are flowing through and some customers are willing to pay more that there might be a gaming PC customer, and they're willing to pay more for the higher spec model, whereas a lot of customers are trading down and trying to stick to their price points. In terms of what we're seeing impact on demand, -- to date, it has been okay. Units -- just for context, for the full year across PC and Apple, we're in unit growth. So we've got some ASP growth and unit growth as well in the category. But it is -- it can be lumpy when price rises go through. Obviously, prices are established as new price and then it impacts promotional activity post those prices. And also suppliers are dealing with significant cost increases. And so they're trying to maintain their profitability in those categories as well. So overall, it's washing through. The other challenge we call out is availability. It does -- because supply is tight, that is the key reason why a lot of the time, there may not be as long or as deep a promotion as there has been in prior years. So all of that is coming together. You'd expect it to wash through over the coming 6 months. It is an unusual phenomenon for us to have significant price rises in the technology category, and it is just a short-term impact that will flow through and be resolved hopefully over the next 6 months.

Your next question comes from Michael Simotas with Jefferies.

First question from me is on costs. JB has always done a good job of managing CODB. That continued in the second half, but CODB did grow faster than sales. To what extent can you control costs if sales remain tough? Is there any way that you can continue to match your cost growth to sales? Or should we expect some operating deleverage if sales remain where they are?

Thanks, Michael. Yes, I'll take this one. So I'll step through FY '26, and you kind of mentioned the numbers there, but just to give you context for how we're thinking about it for FY '27. So for FY '26, we had some fair work increase and a super increase. And then obviously, we manage our wages as a percentage of sales. We forecast sales each month and then we roster up and down accordingly. Depending on the time of year and the brand, we've always got a good mix of casuals in our business, approximately 25%, and that enables some flexibility. And as you mentioned, you can see that coming through in the numbers in FY '26 when we had stronger sales growth in the first half. We reinvested with CODB broadly in line with sales. But then in the second half, you could see that CODB came back down to 2.6% in JB Hi-Fi Australia and also 2.6% in -- the Good Guys as those sales came down. The team did a fantastic job of managing that cost base in that more uncertain environment whilst also maintaining conversion in store. So when you look forward to '27 and there's a fair work increase of 4.75%, we'll continue that practice whilst being very focused on ensuring we don't compromise our in-store service, which is a critical part of our model. And then to your point on trying to manage it at or below those levels, we'll look at productivity benefits. Some of those are more efficient data-led rostering. And you heard Nick call out the ESL rollout. This will enable us to save or reinvest in labor hours that would have otherwise been spent ticketing. So there's no doubt it becomes more difficult in the current environment, but we have the system structures and low-cost culture in place to help manage it.

And I'll just jump on what Dave was saying as well. I think like we have the flexibility to be able to do it, but I will emphasize, we're always going to take a long-term view and make sure we remain really focused on customer service and really making sure that we just maintain our focus on our customer. So we definitely have the flex to do it, but we will take a long-term view to make sure we maximize the opportunity that's there and available for us when our customers are in our store and continue to differentiate on that service and advice, which is absolutely what stands us apart from our competitors.

Would it be possible for CODB in JB Hi-Fi Australia and the Good Guys to decline year-on-year if top line trends remain tough? Or would that be too much to ask given the underlying inflation?

It is always -- it is possible. It is possible, but it isn't something that we would be looking to do. I think absolutely risk service.

Your next question comes from Tom Kierath with Barrenjoey.

Just on the Good Guys margin in the second half, the gross margin, can you maybe just give us a bit more color on what's happening there and whether there's any kind of you're buying stock early and then there's a price rise and there's some sort of kind of benefit that happens later there. It just looked a bit it rose quite a lot in the second half.

Yes, there's not really -- it's not price rise driven because it's -- that's more in the tech categories, which is less important for -- good Guys. It is -- there's definitely mix helping in that as we're mixing into those larger home appliance categories where they are typically higher gross margin. So that is helping. And then we are -- it is a tough market in the home appliance market, and we're delivering pretty solid growth, and we are being rewarded or recognized for our scale in what is a tough market. So I think it's a combination of mix and then our scale and working with suppliers to maximize the opportunity.

And then just broadly, there have been some competitors kind of entering the categories. Bunnings is coming into white goods and Officeworks is kind of having another go with laptops. Have you noticed, I guess, a more competitive pricing environment and your pricing gaps kind of narrow a bit as other players start kind of coming in?

Look, we say, as I called out, it's competitive, but we're used to dealing with competition, and I think we're managing it well. We've -- if you look back over the years, Tom, you know us well, we've seen a number of different competitors come and go, and we'll expect that to continue. So as we always have, we'll just -- we'll make sure we stay focused on the customer, and we'll just continue to make sure we're known for value. We'll leverage our scale with suppliers to make sure we get the best possible pricing for our customers. We'll differentiate on service. All those things that have held us in good stead over the years will continue to hold us in good stead in an evolving competitive market. But like I said, I think if you look over a number of years, there's always been competitors, and we're sure that that's going to continue.

Your next question comes from Bryan Raymond with JPMorgan.

Just on -- continuing on this theme around availability and promotional activity post price rises. I agree July is not something we should be focused too much on given the size of that month. But you've got some big events coming up in 2Q, obviously, Black Friday and Boxing Day. I'd just be interested in your thoughts around whether the supply base is starting to -- sorry, whether that supplier base will be less promotional at those major events? Or do you think they're keeping their powder dry at this stage in order to hold that back for those key events?

No. At this stage, we're very optimistic on those big promotional events. Like I say, we can see -- we can absolutely see customers looking for those key promotional periods. And we think that Q2 promotional period will be very significant, and I think suppliers are lining up behind it as well. So we're still very optimistic for those Q2 promotional events.

And you don't think availability will be a challenge there given that has been a challenge of late?

No, I think we're close to getting through the bulk of the availability challenges.

Okay. Great. And then just continuing on the theme around gross margins, just the JB's 2H gross margin down 25 bps year-on-year. I assume mix played a role there. But given Apple was in short supply, I thought that might have helped it a little bit. Was it mainly price matching peers with those slower inventory turns? Or is there other factors at play in that second half?

It's the -- one for a start, I'd say it is kind of 21.93% in the second half. So it's pretty -- it's a little bit under our 22%, but it's cycling at probably an elevated gross profit position in the second half last year. Yes, the stock positioning is having some impact in that second half. So it's -- yes, like I said earlier, the fact that we have a leaner stock position and have more of the stock at a higher price compared to some of our competitors who can hold price lower for longer as a result, that is having some impact in that second half.

Your next question comes from Ben Gilbert with Jarden.

Just, not to focus too much on July, but just sort of wrapping up what you both said around July. So you've got the headwinds that you're cycling through from Switch and 100 bps in the PCP. You've got Samsung a couple of weeks later, which presumed a bit of a drag at availability issues. As we start to move through the rest of the year, those in theory ease plus you've got more promotional periods and you still got this pricing situation coming through. I appreciate you haven't given guidance, but you put all that together and the inference would be that you're expecting comps to move at least flat or positive through the rest of the year. Is that a fair assumption? I'm just trying to put a lot of what the puts and takes you sort of talked around July through because it feels like a lot of those headwinds should start to ease. And if anything, we start getting some tailwinds and you chuck GTA, et cetera, in there as well.

Yes. Look, I think that's right. We look at it and go, July is 1 month, and there is some unique factors in July. You know our business well. We don't enjoy recording negative comps, and we'll be absolutely driving to get back to positive sales growth. I think yes, I think Q1 is it's hard to see -- you'd expect momentum to improve into Q2, and it's more -- as you enter that key promotional period. Yes, there is some product release coming in Q2, which would be helpful with GTA 6. And you would expect Apple will have a release in Q2 as well on phone. So there's a good product coming through. And then we get to start to cycle easier comps into the second half. So yes, there is some shorter-term headwinds at the moment, but we would expect it to improve over the course of the year.

Helpful. And second one for me is the telco, biggest category at least in JBs. You could just remind us, I think your contracts up next year. There's obviously a bit more competition coming from Amazon and Harvey's at the moment. How do you think about sort of continuing to maintain that growth in telco? Like is there a scenario where you look to split the contract across multiple providers or bring in another sort of player in that allows you to sort of switch and buy some of that opportunity with the telco category. I'm just trying to think about how you see that as sort of opportunity for growth over the next sort of 12, 24 months as well.