JB Hi-Fi’s share price indicates the market has firm expectations that good earnings growth will continue. We explore some of the arguments trying to justify the lofty valuation. Electronics categories are not defensive. Price deflation is common and replacement cycles vary. Just under half JB Hi-Fi’s outsized earnings growth over the past five years is a function of market share gains that will be harder to sustain.

Retailers and investors perceive certain retail categories as defensive. Typically, the implied definition of defensiveness centres around the stability of demand, as measured by volumes. However, this perspective is far too narrow given the impact price and cost structures can have on a retailers’ profitability. In Issue 7 of The Retail Mosaic report, we analyse the volatility of volumes, price and dissect the cost structures of the retailers. We also analyse the share price volatility of retailers. Moving beyond just volume as the measure of defensiveness reveals a very different list of companies that are truly defensive. The most defensive retailers, taking into consideration, revenue, earnings and share price are Premier Retail, Wesfarmers, Woolworths and Bapcor.