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Australia's JB Hi-Fi H1 Profit Surges but Shares Drop

Australian home electronics retailer JB Hi-Fi Ltd posted a 60 percent jump in first-half profit, boosted by ravenous demand for flat-panel TVs, and upgraded its outlook but its shares were hit on worries about consumer spending.

The retailer said sales so far in January and February have continued the strong momentum of the first half and profit for the full-year would rise as much as 49 percent.

Its shares initially rallied 2 percent, but swiftly reversed course to trade down 9.0 percent at A$11.48 at 1139 GMT, as investors worried more about the impact of rising interest rates on future sales.

"It's another in a long line of retail stocks that has delivered a very good result and been sold off regardless. The market is more concerned about rising interest rates and consumer confidence levels," said ABN AMRO Asset Management portfolio manager Matthew Hoult.

"A lot of top quality retailers are being sold off with abandon," he said.

Upmarket retailer David Jones met with a similarly harsh reception on Monday to a profit upgrade, initially gaining 6 percent then closing down 4 percent after Australia's central bank warned interest rates will probably need to rise further.

Analysts have said consumer spending is set to slow this year as the economy softens and the central bank engineers a slowdown in demand.

Shares in JB Hi-Fi have fallen 26 percent this year on worries about discretionary spending. It was one of the market darlings in 2007, rising 138 percent as its sales surged on robust demand for gadgets.

JB Hi-Fi raised its full-year sales forecast to A$1.8 billion from a previous forecast of A$1.7 billion, or a 40 percent increase.

The company, which started out selling car radios, said it expected full-year net profit after tax to be between A$57-60 million, an increase of 41-49 percent on the previous year and above the consensus of analyst forecasts of A$57.0 million.

JB Hi-Fi, which competes with Harvey Norman and Woolworths' unit Dick Smith Electronics is in an aggressive expansion phase and opened 15 new stores in the half for a total of 104 stores.

JB Hi-Fi said net profit for the six months to December rose to A$41.94 million ($37.8 million) from A$26.2 million a year ago.

That was above market forecasts for net profit of $39.0 million, according to a Reuters survey of four analysts, and exceeded the previous year's full-year profit.

Same-store sales rose 18.8 percent in the half, while margins increased 22 basis points to 6.56 percent.

Both pre-Christmas and post-Christmas trade was strong as consumers continued to upgrade audio-visual technology and laptops, while JB added computers and mobile phones to its product range.