LA Private

Harvey Norman’s profit slumps

A slide in sales and profits was always on the cards after Harvey Norman (ASX:HVN) provided updates in recent months about the sales performance in what was a tough six months to the end of December.

The final update in January showed a slowing in the rate of fall in sales, with the drop for the half just over 6%, compared with an earlier peak of 9.9%.

Directors said the company faced headwinds in many markets—not only in Australia, but also in New Zealand and parts of Eastern Europe, where it is expanding.

On Thursday, on the final day of the December reporting season, the retailer produced what were not good-looking figures.

The company reported a 46% slump in pre-tax profit to $283.6 million for the six months to December 31, while the after-tax result dropped 45% as well, to just $202.8 million.

Net earnings were the lowest since the pre-pandemic year of 2019.

The board dropped the interim dividend by 23% to 10 cents a share from 13 cents a year earlier.

Sales fell $334.4 million to $4.64 billion.

Yet, investors were relieved there were no more surprises in the release, after the two updates during the half shocked with the size of some of the falls in sales.

As a result, the shares rose past $5 to set a new 52-week high of $5.09.

Profit from its Australian franchisee outlets, which represent approximately half of the group’s earnings, slumped almost 40% thanks to a 14% drop in revenue.

The group’s overseas retail businesses in NZ, Malaysia, Singapore, Ireland, Slovenia, Hungary, and Croatia, which are operated by the company (and account for just over a quarter of total profit), saw a near 24% drop in earnings as well.

Harvey Norman plans to open new stores in Malaysia and New Zealand, despite what it called challenges in Croatia and Hungary.

Overseas retail sales were hampered by persistent macroeconomic headwinds in New Zealand and inflationary pressures and geopolitical tensions across Europe and Asia that have decreased foot traffic and spending in the homemaker category, the company said.

Despite the difficult economic environment, Mr. Harvey said the group’s $4.14 billion property portfolio and $7.86 billion in total assets put it in a strong position.

“Amid the challenging retail conditions in the first half of financial year 2024, we have continued to deliver sustainable growth in net assets, rising to $4.51 billion as at 31 December 2023, a substantial increase of $1.23 billion since the start of the pandemic,” he said in Thursday’s release to the ASX.