Shares in retail chain JB Hi-Fi (ASX:JBH) jumped over 7.5% on Tuesday after the company announced plans to buy back up 10% of its shares.
But the company lowered its FY11 outlook as a result of the buyback and a planned restructuring.
JB Hi-Fi plans to conduct an off-market share buy-back to be funded by an expansion in its existing debt facilities.
CEO Terry Smart said JB Hi-Fi “is now in a position to return capital whilst still maintaining financial flexibility to invest in growth opportunities.”
He said he expected the buy-back to be earnings per share accretive and positively affect return on equity.
To finance the buyback JB Hi-Fi has increased its three year senior debt facility, expiring March 2014, by $105 million to $250 million.
The company separately revealed it would restructure its Clive Anthonys chain of electrical stores after a series of disappointing results.
The ten stores have had unsatisfying returns for the last several years, and earnings further deteriorated in 1H11, JB Hi-Fi said.
The restructuring will result in a pre-tax charge of $33.4 million, including around $18 million in writedowns of tangible and intangible assets.
JBH shares had grown 7.53% to $19.850 by close to market close on Tuesday, even though the two announcements have had an impact on the company's profit forecast for FY11.
Statutory profit guidance was cut to between $108.5 million and $113.5 million, compared to the company's February outlook of $134 million to $139 million.
But JB Hi-Fi said the two moves are likely to have no impact on its sales – forecast to be $3 billion – or underlying profit for the year.
Also on Tuesday, JB Hi-Fi appointed Richard Uechtritz - co-founder of Rabbit Photo and Smiths Kodak Express - and Beth Laughton - a chartered accountant and director of the Defence SA Advisory Board - to its board as non-executive directors.