While some discretionary retail stocks have taken a hammering this year, electronic goods retailer JB Hi-Fi Ltd has been able to maintain a "buy" recommendation from a major investment house.
Deutsche Bank analyst Kristan Walker has set a 12-month price target of $13.80 for the company, compared to its current market price around $11.74.
Shares in upmarket department store David Jones Ltd have slumped 48 per cent this year, in line with some fellow retailers like Noni B, Just Group Ltd, and Clive Peeters.
Shares in white goods and electronics retailer, Harvey Norman Holdings Ltd, have fallen about 55 per cent.
JB Hi-Fi - which also operates under Clive Anthony banner in Queensland - is currently trading about 25 per cent down this year, as consumers tighten the purse strings due to surging petrol prices and higher interest rates.
But Mr Walker said JB Hi-Fi offers good exposure in the high growth consumer electronics category.
"JB Hi-Fi offers consumers a differentiated value proposition that still has a few years left before the brand reaches saturation levels," he said.
"With one of the lowest retailing cost bases and highest lease adjusted return on investment capital (ROIC) among our domestic retail coverage universe, we believe JB Hi-Fi deserves a premium rating."
Despite slowing retail sales and estimated flat to negative sales growth by the domestic appliance and recorded music category during the new financial year, Deutsche Bank expects sales growth for JB Hi-Fi to remain at above industry rates thanks to its continued store roll-out, category expansion and maturity levels of existing stores.
"Based on our detailed modelling of the impact of the store rollout on earnings, working capital and capex investment, we believe these three factors will mitigate the short-term risks to discretionary retail spending," Mr Walker said.
On Wednesday, another retailer Woolworths - which houses Dick Smith, Tandy and Powerhouse chains - recorded double-digit sales growth of 10.6 per cent for its electronics goods division in the June quarter, which will keep the pressure on JB Hi-Fi and Harvey Norman.
However, Woolworths' sales were inflated due to its joint venture in India which jumped 148.8 per cent, while its Australia/NZ sales were up only 4.9 per cent.
By 1226 AEST Thursday, shares in JB Hi-Fi jumped 56 cents, or 5.01 per cent, to $11.74 - just below its five month high.
Last month, its shares jumped 12 per cent in one day after JB Hi-Fi upgraded its full year profit forecast to $64 million for fiscal 2008, up from its previous guidance of between $57 million and $60 million.
JB Hi-Fi said guidance for sales for 2007/08 would be up 40 per cent to $1.8 billion compared with the previous year.
The revised expected profit would be a 58 per cent improvement on the $40.4 million annual net profit posted in the 2007 financial year.
JB Hi-Fi is due to report its full year sales results mid- August.
© 2008 AAP
