Oz Retail Exposed As Uncompetitive: Morgan Stanley

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Harvey Norman and Co are in for a shock.Retail landscape is in for a shakeout in 2011, say analysts.

Some of the major retail giants – Harvey Norman, JB Hi-Fi and Myer included are in for a huge shock, with analysts saying their trading could be uncompetitive.   

In its 2011 forecast, Morgan Stanley has said the Productivity Commission investigation into retail landscape here, is likely to find that it is ‘uncompetitive,’ despite claims by CEOs that GST is killing trade.       

The investigation, established following the furore kicked up by retailers claiming that internet trading eating into their sales figures, and demanding a GST of 10% be introduced on all online goods purchased from international retailers, who are currently exempt from the tax.            

Major price discrepancies between Australian and foreign retailers are clear – the Samsung Galaxy Tab is available online for $500 online from US retailers, while it retails for almost double that – at $899 in Harvey Norman stores.   

The recent strength of the Aussie dollar also meant consumers were getting more bang for their buck buying from overseas. 

It’s not the first time the market analysts have forecast shaky ground for the ASX listed giants – late last year they warned that retailers including JB Hi-Fi and Harvey Norman were set to make major financial losses due to the growth of online rivals.

However, reports this morning indicate that all is not lost for the retail sector.

Share prices at Harvey Norman, JB Hi-Fi and David Jones are on the way up after better than expected end-of-year financial results were reported at outdoor retailer Kathmandu and Super Retail Group. 

New Zealand based Kathmandu announced a sales hike of more than  whopping 10.3 percent  in the second quarter of last year, while Super Group profits were more than double that forecasted – jumping from a conservative $9.5m rocketing to $25m.

However, analysts expressed caution about the likes of Harvey Norman and Dick Smith repeating this success and expects profit figures to suffer a fall, according to Evans & Partners analyst Tony Wilson.  

However, despite this share prices still floated higher for the tech retailers, with prices on Harvey Norman stock opening on a 3.22 high this morning.

 

Massive product margins and a domestic market of 20 million consumers all to themselves are just some of the conditions retail stores enjoyed for many years – although not much longer it seems.   

However, that’s not the only surprise in store for Harvey Norman.          

This year could also see the electronic kings issuing shares to pay a special dividend, say Morgan Stanley.          

In previous years, almost half of the analysts’ predictions came through, although we’re sure Gerry Harvey has his fingers crossed one or two of these fail to materialise.

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