Out on top

JB Hi-Fi shares are down about 5.3% this morning despite the fact that the company just announced a 29% increase in net profit to $76 million for the six months to December 31.

The reason for the big slump would appear to be the resignation of its chief executive, Richard Uechtritz, who will step down in July or August after his 10-year anniversary at the helm of what has become Australia’s best-performing retailers.

It appears that Uechtritz has simply had enough.

“On a personal note it is time for me. Ten years is a good innings as a CEO,” he said this morning. “The company is in great shape – with a strong balance sheet and good growth prospects. I will be leaving to pursue my personal and philanthropic interests that being a full-time executive does not allow.”

His performance in charge of the music and electrical goods retailer has been impressive. He joined the company in 2000 as part of a private equity management buy in, and led the company to a very successful float in October 2003.

The company’s sales have increased from $145 million when he joined to a staggering $2.8 billion this year and the ride for shareholders has been brilliant. From a $1.55 issue price, the stock has surged to above $19 over the last six-and-half-years.

What’s been particularly impressive is the way Uechtritz has handled the rapid expansion of the business, although it must be said he has been helped by the booming Australian economy and then the government handouts which underpinned the retail sector last year.

Despite it’s growth, JB’s image in the marketplace is that of the underdog – the little discount store with the handwritten price tags, the beaten-up shop fittings and the salesman who are always ready to make a deal on that flatscreen TV or DVD player. In a market where consumers prize value above all else, JB’s brand positioning has been admirably steady.

Investors and analysts will be unhappy to see Uechtritz go, although he will be replaced by right-hand-man Terry Smart, currently chief operating officer.

And the company has done its best to reassure investors that Uechtritz will remain involved. He will become a non-executive director to the board after a six-month absence, and he will also consult to the business for the next three years (not a bad little deal, really).

Timing your exit is tough and the market may have the final say on Uechtritz’s decision. But as he leaves with a share in the company worth almost $30 million, you can’t see he hasn’t gone out very close to the top.