Someone seems to have forgotten to tell the CEO of Harvey Norman that the fastest growing category during the recent Black Friday sales in the USA was consumer electronics after the retail veteran took a swipe at consumer electronics, IT and the margins they deliver at his recent AGM.Chief executive Gerry Harvey not only took to slagging off CE and IT, he also took a swipe at his customers who buy smartphones, tablets, gaming consoles and PCs claiming “They live on the bloody things. It’s so invasive into your lifestyle.”
In a frank admission he told shareholders that his local operations were ”treading water” and that his sales were getting hit by indifferent consumer spending and massive price deflation, which has led to the company repositioning its shelf space away from electronic goods where the price erosion is most severe.
He cited as an example of price erosion a 32-inch colour TV advertised recently for $299. ”We were selling those things for $699 a year ago” he said.
“If you’re in the audio visual, computer segment in retailing, you’re getting a hiding and there is no end in sight for that hiding,” he added.
After telling attendees that he was expanding away from Australia and consumer electronics into markets like the USA, 50 shops in Malaysia, Singapore, and Europe, his fellow director and wife Katie Page pulled up the 72 year old CEO saying “I don’t think we will be in America in 10 years time Gerry, I hate to break your dream there” she said.
She added ”I think our biggest ray of sunshine is Asia,” said Page, who recently attended the opening of the company’s $38 million Space Furniture superstore in Singapore, which is acting as a regional sales hub.
After being pulled up by his wife, Gerry Harvey, who last week launched a new online operation, then took a swipe at the Internet claiming that people could live to regret the advent of the internet over the next 10 to 15 years.
In what appeared to be an indication that his electrical business was suffering he said that his stores were selling large numbers of televisions and audio equipment, but prices were continuing to fall making profits hard to come by.
“I don’t ever remember selling as much product as we’re selling now while having so little turnover,” he said.
“It’s extremely difficult.”
When asked questions about his new online operation he said that any businesses had to be realistic about the effectiveness of selling on the web. He said that there were no accurate sales and profit figures and that he was still uncertain about the value of being online.
He said that the Harvey Norman’s online business will grow to one per cent of total sales this year, and by one per cent per year for the next three years.
He finished by taking what appeared to be a stab at Kogan Technology by saying that there were a lot of “bull s****ers” spruiking the benefits of online retailing.
Not content with bagging out online Gerry Harvey then turned to Dick Smith, JB Hi-Fi and department stores, claiming that they had a huge problem because they didn’t sell whitegoods, furniture or homeware.
“They’re in a very precarious position and somewhere along the line some decision has to be made about Dick Smith and JB Hi-Fi is as they are in a similar situation,” he said.
Not content with his tirade against margin erosion and consumer electronics, Gerry Harvey then turned his attention to the Federal Government and Treasurer Wayne Swan claiming that ”I don’t quite get this business about ‘the budget has to be in surplus by 2013, or 2014.”’
”If it makes good sense not to do it, then don’t do it,” he said, adding that ”a big percentage of the businesses in Australia are under stress’.’
”The whole market is in a state of extreme change at the moment so we’ve had to look at our business and said you can’t solve this problem with TV sales because we’ll have to sell three times as many to earn the same dollars as we were two to three years ago and that’s what’s affecting our sales. We’re making more sales of everything, but it’s all cheaper.”
”I think this Christmas will be OK, but this is the first time that I can remember where I haven’t said this Christmas will be the best Christmas ever,” he said.