Shock Result: Harvey Norman Profits Down 16.5%

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Harvey Norman reports a shocking result with the big winner being the consumer with the company forced to discount over several product categories during the Christmas period. This was in spite of having increased its number of stores from 195 to 198.Profits at the electronics giant have slid to $198.61m (before tax) – from a previous high of $237.77m.

This was in spite of having increased its number of stores from 195 to 198.

Harvey Norman blamed poor weather, the strong Australian dollar and a challenging environment in retail for the profit landslide. 

Price deflation in the laptop and TV market was also adversely affecting margins, said the retailer. Operating margins fell  from 6.7 percent in 09 to 5.63 percent for last year, a trend which was also reflected in Dick Smiths results, announced earlier today.

Net profit from continuing operations (after tax) tumbled to 17.1 per cent, at $131.6m.

The figures, which cover the period to 31 December 2010, however showed sales revenue actually rose to $804.1m up from $715.6 in 2009.
 
Chairman Gerry Harvey maintained a positive outlook of his retail division despite the poor result and referred to its franchise operation as “robust” and growing in market share, and underpinning the group’s performance.

“Our profits were down as a result of price deflation in key categories, driven by the strong Australian dollar, the challenging retail environment and also the extreme wet weather on the east coast of Australia,” said Chairman Gerry Harvey, in a statement just released. 

Its bedding and furniture business was onto a winner, however, outperforming the market.

Investment costs associated with the purchase of the Clive Peters franchise and Ricky Hart stores also had an impact on profits although strong performance of new operations in Slovenia, Singapore and Malaysia helped contain losses.

 

The acquisiton of the 28 Clive Peters stores in July last had provided a “positive boost” to its retail offering, the company said, although it suffered a loss of $20.6m before tax.

Sales revenue from its Irish operation, which has 14 stores, a country which is in the midst of a major economic  recession, also fell by $22.2 – a decrease of 18.2 per cent when converted into Aussie dollars. 

However, they “remain committed to Ireland in the long term,” according to the statement.

This gloomy profit result came as rivals Dick Smith announced a jump of 6.5 per cent in sales this morning, citing computer, LCD TVs and navigation systems as some of the most thriving sectors in their business.

Their online operation was also singled out for praise at the self named ‘techxpert’ reporting “strong customer trading” online following their fully fledged expansion of their online presence last year, something Harvey’s had to date refused to do.

This follows the enormous controversy that has plagued Chairman Gerry Harvey, who was the most vociferous among the retail group, which included Myer Just Group and David Jones who kicked up a fuss over the lack of GST placed on foreign goods bought online.

He also sugggested following in the footsteps of retail gaint Myer and moving Harvey Norman’s online operation to China, if Canberra failed to implement a 10 percent GST tax.

However, he subsequently had to backtrack following his claims he was the target of a witch hunt and receiving hate mail from disgruntled consumers. 

 

”Because of my profile, I then get all these threats and people hone in on me. It becomes me, Gerry Harvey and Solomon Lew – billionaires, greedy, ugly, old, out-of-date c—s, and the people writing this seem to think we have been ripping them off for years and that we deserve this.”

The company also confirmed a 6c per share dividend was to issued to shareholder in May.

 

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