Home entertainment retailer JB Hi-Fi has announced it is in preliminary talks to buy electrical appliance giant The Good Guys.

JB has been pushing to expand its market reach in whitegoods and small appliances, so far through internal expansion of its "Home" format stores, a potential threat to rivals including Harvey Norman and Bing Lee.

"JB Hi-Fi evaluates all possible opportunities against a range of factors and would only pursue an acquisition if it made compelling financial sense for our shareholders," the company said in a statement released to the ASX confirming the talks.

The company said it has not made a decision nor has it entered into any agreement relating to the acquisition of the Good Guys.

JB operates 194 stores across Australia and New Zealand, of which 56 sell home appliances.

A further 22 existing JB Hi-Fi stores added small appliances in the half-year to December, with another 15 expected over the rest of the financial year.

In April the Good Guys appointed external advisers, including Helfen Corporate Advisory, to analyse a possible future initial public offering (IPO) and listing on the ASX.

The Good Guys has annual sales of around $2 billion and employs over 4,000 people, with 100 stores across Australia.

The company has been approached for comment.