How JB Hi-Fi Control Their Stock As Others Struggled

Below is an article published by ChannelNews on the 25th January 2023.

Last week, JB Hi-Fi delivered a result that some analysts were not tipping, with unaudited earnings before interest and tax up 14 per cent on an 8.5 per cent lift in sales.

Unlike Kogan’s recent financials, there was no mention of stock levels – a hot topic among retailers, because the mass retailers have stock under control due to just-in-time intelligence and an extensive stock control management system.

During the recent holiday period some retailers, including Kogan and Harvey Norman, were desperate to reduce their stock levels, with several people questioning how JB Hi-Fi is able to constantly deliver growth while managing tens of millions in stock.

It appears the key to controlling their stock levels rests with intelligence delivered by software from V Net Solutions, an operation that is highly regarded by management and is seen as a vital part of their decision-making processes when it comes to the high level of stock the business is managing on any given day.

Related: JB Hi-Fi’s Figures A Blip Or A Hint At Good Tidings: V Net Solutions

Cameron Trainor, the CEO of JB Hi-Fi says, “We traded through the Christmas period with unprecedented operational efficiencies in managing our stock flow through this high-volume trading period. The introduction of V Net across our entire suite of products contributed significantly to JB Hi-Fi hitting ambitious in-stock position, stock turn and weeks cover targets.”

He said the financial outcome was the result of a major contribution by V Net in helping JB Hi-Fi management “achieve their sales and working capital targets”.

Several major Companies, including Microsoft, Amazon, Target, Big W and Intel, have invested in the Sydney-based business that has been described as a “fly under the radar” operation who are key when it comes to the success or failure of a retail store when it comes to stock control.

The CEOs of major retailers know that when they go to the market with their financial results, stock levels can be a key indicator as to the health of their retail operation. High stock levels can result in millions being wiped off the value of a Company.

Back in mid-2022, Ruslan Kogan, the normally publicity seeking CEO and founder of Kogan who has gone remarkably quiet of late, claimed that better times were ahead and that they had fixed excess inventory issues weighing on profits, but this appears not to be the case, based on their latest financials.

Yesterday he revealed that he had only managed to shift 39 per cent of an ageing stockpile of Kogan goods, which are sitting in several Melbourne warehouses.

This means that he still has 61 per cent of the stock he shipped into Australia during COVID lockdowns, after punting on a COVID sales upturn, with retailers such as JB Hi-Fi, Big W, Kmart and The Good Guys now stripping share away from the struggling online retailer where stock levels and poor profitability due to the business heavily discounting the stock in an effort to shift it out of their warehouse, resulting in mounting losses.

For the six months ended 31 December, Kogan reported a 32.5 per cent decline in gross sales to $471.1 million, despite constant discounting of his stockpile.

For brand partners, marketplace sales declined 35.7% there was also a 41% reduction in Exclusive Brands sales, a 49.2% fall in third-party brands sales, and a 9.1% drop in Mighty Ape sales.

Things were even worse for its earnings, with gross profit falling 42% to $62.9 million and its loss before interest and tax increasing to a record of $31.3 million.

Management advised that this was driven by its soft top line performance along with significant discounting to clear through the bulk of excess inventory.

What Companies such as V Net Solutions is doing is allowing key retailers who shift tens of millions in stock in any given month to manage supply chains in a way which boosts sales, because the products are always on the shelf and reduces inventory because the goods are placed better.

The V Net platform utilised the MS Azure Intelligent Cloud to run AI / ML forecasting models, providing JB Hi-Fi with what has been described as the best “In class consumer demand replenishment order and demand” management system.

V Net Solutions has implemented a software-enabled CPFR process with JB Hi-Fi that is optimised to manage replenishment and allocation plans and advanced consumer demand forecasts, the business claims.

They have also established a powerful analytics platform for JB Hi-Fi and their strategic trading partners with more than 100 key brands getting real-time supply information.