JB Hi-Fi is a retailer of technology and consumer electronics — computers, tablets, TVs, cameras, audio equipment, home theatre, games and entertainment media — sold at competitive prices to a young, tech-savvy customer base through its network of JB Hi-Fi and JB Hi-Fi Home stores in Australia and New Zealand, complemented by its online marketplace. The Group also owns The Good Guys, a home appliances and consumer electronics chain, and e&s, a smaller premium home appliances and bathroom products retailer.

If someone offered you an opportunity to buy a company that had increased its earnings by 2.5 times in the last 10 years, and around 20 times over a 20 year period, with commensurate increases in dividends while increasing returns on capital to around 25% — how much would you be willing to pay, or alternatively what multiple would be fair for a company with this track record? At the super conservative end one might say 15 times earnings, while many may be willing to pay over 20 times earnings based on such numbers. Now, if we add in one additional piece of news — that the company has noticed a drop in sales of around 1% (for a single month) — would that piece of information change your view? That is the question you need to ask yourself here when considering JB Hi-Fi.

Even as a retail business, JB Hi-Fi has been one of the most impressive growth stories on the ASX. Back in 2006, EPS were at 24 cents per share, and now in 2026 record earnings have been achieved at $4.46 per share. Compare that with a competitor like Harvey Norman (ASX: HVN), where over the same period earnings have only doubled. We think that speaks volumes about the quality of management at JB Hi-Fi. We see evidence of this when we look at the share count not being continually diluted, with some share buybacks in recent times, and the fact the company can grow without debt. Importantly, even though JB Hi-Fi predominantly sell low margin products, management have improved returns on capital by around 10% over the past decade.

So then, with such great numbers and a track record of successful growth, why is the company down almost 50% from the start of the year? Well of course, there is plenty of "noise" in the world — inflation and cost-of-living pressures, fuel prices and wars — all coupled with a trading update that sales were slightly down in July. Is this an existential threat to JB Hi-Fi? Highly unlikely. Could 2026 be a "down" year? Quite possibly. But we cannot think of a time where there hasn't been negative sentiment lurking around JB Hi-Fi. Ten years ago, Amazon were going to cut their lunch and their business model would go up in smoke — we have since seen how that played out. Cost of living pressures and increased interest rates have been at play for several years now, and yet the company still produced its highest revenue ever. And have you ever been in a JB Hi-Fi store? They are generally very busy — a great omen — and their staff are perhaps the most helpful going around in the retail business (Bunnings could learn a thing or two about having knowledgeable staff).

In summary, JB Hi-Fi fits the Buffettism mould of being a "wonderful company at a reasonable price" in our opinion. 2026 may be a tough year, but we are confident that JB Hi-Fi will continue to grow over the foreseeable future, and hence for full disclosure we have been buyers at these levels.