Gerry Harvey’s retail empire has suffered its first loss of the pandemic but investors are nonetheless impressed with how Harvey Norman has emerged out of lockdown.
Shares in the $6.4 billion electronics and homewares firm were up nearly 5 per cent on Friday, even as it unveiled a drop in revenue and profit during a Covid-riddled first half of the financial year.
About 60 per cent of the company’s stores were closed for periods during the half, while the absence of JobKeeper payments, and a spike in rental waivers for franchisees, hurt the firm in a way previous lockdowns did not.
xjmtzywHarvey Norman – along with retail rivals Kogan.com, JB Hi-Fi, and Temple and Webster – benefited hugely in the early stages of the pandemic, as a river of stimulus flowed into the pockets of locked-down Australians, many of whom upgraded home offices, shopped online and embarked on home improvements.
But the online retail sheen dulled somewhat in 2021, as most were unable to replicate early, stratospheric profit results.
Stimulus support for businesses and individuals also dried up, while companies and their customers have also found themselves at the mercy of supply chain chaos.
That said, reports of a better-than-expected post-lockdown period sent traders flocking to Harvey Norman on Friday, lifting the share price as high as $5.22.
Mr Harvey – the company’s colourful founder and executive chairman – credited pent-up demand as the reason for an improved run into Christmas, with sales exceeding expectations flagged back in November.
He also said things have continued to improve in 2022.
“Except for Ireland, where sales were virtually flat, there has been sales growth in all countries for the period January 1 to February 21,” Mr Harvey told investors.
“The strengthening momentum in the home renovation market and heightened consumer demand since the start of the pandemic continues to drive sales across the key Home, Lifestyle and Tech product categories, with the ‘home’ continuing to be the focal point for consumer spending.”
Total revenue for the half fell 6.2 per cent to $4.9 billion, but the trading period between October to December was only slightly softer than the same record-setting period a year ago.
Underlying profit slipped 22 per cent to $340 million, but when revaluations on Harvey Norman’s property portfolio were taken into account, the figure was just 6.7 per cent lower at $430 million.
Harvey Norman will pay shareholders an interim dividend of 20 cents per share, flat on last year.
This is fully franked and will be delivered on May 2.
Harvey Norman did not mention inflationary pressures in its financial documents, but told The Australian in an interview it expected prices to rise in the coming months.
“There is nothing not going up in the whole market. Doesn‘t matter whether it’s petrol or food, everything is going up at the moment and that’s why everyone is talking about inflation. It is true it is happening,” he told the publication.
“Now there is talk about much higher interest rates, even though the Reserve Bank says they are pretty much not. And so the best guess is that interest rates will go up, but they won’t go up by as much as some people think.”
