Gerry Harvey the CEO of Harvey Norman started the year moaning about online, now he’s moaning about Christmas sales. He’s also landed himself in hot water after claiming that Australians should be “as happy as pigs in shit” with low unemployment and a resources boom, but instead they’re scared to spend money.When 10,000 consumers were asked to rank his comments by the Sydney Morning Herald 74% said his comments were “stupid” 17% said he was “right on the money” and 9% said his comments were “not too subtle”.
The CEO of retailer Harvey Norman made his comments after announcing a 9% lift in profits to $252.26 million in the year to June 30, up from $231.41 million in the previous year.
The profit jump was more attributable to property revaluation than goods flying off the shelves.
The Company said that they had managed to claw back some profit through property revaluations, reducing losses from its Ireland operations, a smaller tax bill and stronger results from Singapore, Malaysia and Slovenia.
The Company admitted that sales revenue were shrinking because goods are being sold at lower prices due to rampant discounting.
While the company’s overall profit improved profit contribution from franchisees fell 18%.
The company said it experienced a strong increase in customer transactions, although revenue declined mainly due to the high dollar making imported goods cheaper. The franchising operations margin fell from 5.99 per cent in 2009-10 to 5.1 per cent.
The purchase of the Clive Peeters and Rick Hart brands were also a drain on the group’s profits in 2010-11 – all of whose stores will either convert to the Harvey Norman or Joyce Mayne formats or will be closed.
Losses associated with this move cost Harvey Norman $41 million in 2010-11 and a smaller loss will be incurred this financial year.
Despite the weakness in franchise income, the company had better results from its property division.
Gerry Harvey said “I don’t see a way at the moment. I don’t see how anything’s going to change. You’ve got too many things out there affecting the minds of humans and it’s just an avalanche of media activity and government activity that’s making people unhappy and not wanting to spend their money.”
Mr Harvey says his business will go along “OK” over the next 12 months, but he remains confused by the lack of confidence among consumers in the Australian market.
“With unemployment at 5 per cent and a resources boom we should all be happy as pigs in shit,” Mr Harvey said.
He said the current economic mix was terrible, with retail, manufacturing and tourism all in trouble. But he says something’s wrong when New Zealand, which isn’t benefiting from a mining boom, is forecasting stronger growth than Australia.
RBS analyst Daniel Bruen told Fairfax Media that Harvey Norman’s result was in line with expectations, but trading conditions would be “a bit soft” in fiscal 2012, consistent with JB Hi-Fi’s outlook.
“That’s something that’s a bit of a concern,” he said. “Judging by the guidance on revenue and the trading update, it’s going to be pretty tough period over the next 12 months.”
Mr Bruen said the company’s online strategy was still in its formative stages and expansion plans remained on hold in Europe.
Harvey Norman’s sales from its franchised Harvey Norman complexes, commercial divisions and other sales outlets in Australia fell 5.3 per cent for the period July 1 to August 29 compared to the corresponding prior year period.
The company also anticipates increased sales in the lead-up to the Rugby World Cup in New Zealand and the London Olympics as it ramps up its online strategy.