Harvey Norman is set to move away from relying on consumer electronics and IT to drive sales; a move which analysts claim could benefit JB Hi Fi, The Good Guys and Betta Electrical.
Instead the national retailer is set to expand their homeware and small appliances range after Harvey Norman Chairman Gerry Harvey warned of a 40% plunge in profits.
Several IT and CE vendors polled by ChannelNews claim the move could have an impact on their overall sales. Some vendors claim the move could benefit JB Hi Fi and online resellers of technology goods.
“The results are worse than we expected,” chairman and co-founder Gerry Harvey said yesterday.
An adjustment in property values has also impacted the retailer who said that the value of the retail stores they own would be down 29.5 per cent to $252.6m.
Pre-tax profits would be down by about 20-25 per cent, after full-year sales fell 7 per cent to $5.74bn, compared to the previous year.
Like-for-like sales also fell 6.5 per cent.
Franchisees at Harvey Norman have told ChannelNews that “negative” comments by Gerry Harvey in 2011 relating to online sales and the need for additional taxes on overseas sales had impacted the retailer with “hundreds of consumers switching their loyalty to other retailers”.
Despite the poor result Harvey Norman shares closed half a cent higher at $1.975.
Gerry Harvey believes price deflation played a major role in the Company’s sales decline; he said that TVs were $1000, less than half what they used to cost two to four years ago.
“A Toshiba laptop costs $3500 five years ago. Now you can pick up an even better one for $500,” he said.
“Price deflation in TVs and computers is happening across the world. It’s a big problem. Products are being sold for less than what it costs to produce them.”
Platypus Asset Management chief investment officer Don Williams told the Australian newspaper it was not surprising that Harvey Norman was suffering in a tough retail market where electronic prices are falling.
“The current price deflation is not going to go away soon,” Mr Williams said. “As a business, Harvey Norman has lost market share for some time to other retailers and online sales.”
