Harvey Norman has reported a significant 8.1% downturn in sales and a 43.9% plunge in pre tax profits with the Company blaming IT and consumer electronics as being a major contributor to their sales collapse.
The Company also blamed competitor activity, due in part to the collapse of WOW Sight and Sound and the pending sale of Dick Smith stores as being a major contributor.
By comparison, sales growth for JB Hi-Fi stores for the 9 months to 31 March was 7.3% (6% including Clive Anthonys branded stores), while sales for the March quarter FY12 for JB Hi-Fi stores (Australia and New Zealand) were up 8.8%.
JB’s sales “improved progressively” over the first three months of the year, it said last week, with February and March figures climbing +4.9% and +5.2% respectively, and expects to achieve its previously announced FY12 sales target of $3.1 billion.
Harvey Norman’s rivals also expects a net profit (after tax) for the 12 months to 30 June 2012 to be between $100- $105 million – down from last year’s $109.7m figure.
According to Harvey Norman AV and IT franchisee sales continue to be challenged; however, the Company did not break out individual sales falls for their AV or IT operations which they claim is being impacted by a move to online retailers by Australian consumers.
They said that AV and technology categories continue to be affected by a decline in average selling price, a move that has seen Harvey Norman go head to head with retailers such as Bing Lee and the Good Guys in a vicious discounting war.
Harvey Norman’s pre-tax profit plunged 43.9 per cent in the third quarter compared with the previous corresponding period.
The retailer also recorded a drop in sales for the quarter, with total sales falling 8.1 per cent, and like-for-like sales declining 7.5 per cent.
In the year-to-date, pre-tax profit fell 25 per cent to $67.5 million on the previous corresponding period, while total sales dropped 6.7 per cent.
Shortly after the announcement Harvey Norman shares took a dive and at noon were trading at $2.00 down 3.4%
Harvey Norman said that a major contributor was a fall in the average selling price of flat-screen TVs. Recently the Company underwent a major restructuring in several of the stores by cutting back on several brands.
In the TV section, one brand that appears to have disappeared from Harvey Norman catalogues and stores is the Panasonic brand. No explanation has been given.
Harvey Norman said that competition has increased since the collapse of Queensland’s WOW Sight and Sound and the scaling back of the Dick Smith Electronics business which is currently up for sale with several Companies currently conducting due diligence on the group.
Woolworths has indicated they will not engage in a “fire sale” of the business if the sale process is impacted by poor profit results from the likes of Harvey Norman and JB Hi Fi.