Harvey Norman books strong sales growth amid ambitious expansion plans in Malaysia

Gerry Harvey’s retail business posts strong sales growth for the first quarter and plans an ambitious expansion of store network in Malaysia.

Harvey Norman chairman Gerry Harvey says he is hopeful of “pretty good Christmas” trading, but is cautious as higher mortgage rates and squeezed household budgets threatens to slow the rush of spending on discretionary goods.

Other than a poor performance in Harvey Norman’s outdoor furniture and airconditioning categories, the retail chain has posted strong sales growth since July.

“Our sales in the last couple of days have been strong and so it does look like Christmas will be good, but the great unknown is next year,” Mr Harvey told The Australian after the company’s annual meeting on Thursday.

“The two areas that we are not happy with are outdoor furniture and airconditioning, for obvious reasons, but everything else across the board is good and if we had better weather, or hotter weather, those two categories are usually very strong in our business.”

On Thursday, in a trading update, Harvey Norman confirmed the ongoing strength in the discretionary retail sector despite monthly hikes in interest rates since May and higher inflation.

The chain also unveiled growth plans in Malaysia, making it it’s biggest overseas operation.

The company released a trading update for the four months to the end of October, with strong sales growth across its flagship Australian stores as well as parts of Europe and southeast Asia.

The retailer said total sales for its Australian franchisees between July and October rose 9.1 per cent, while like for like sales lifted by 8.8 per cent. There was also strong momentum at its Asian stores which came out of Covid-19 lockdowns last year. Sales in Singapore rose 7.5 per cent and 10.2 per cent on a like-for-like basis, while sales in Malaysia ended up 44.5 per cent, or 38.4 per cent on a comparable sales basis.

Harvey Norman stores in Slovenia and Croatia had more muted growth, up 3.6 per cent, with sales declines in Northern Ireland – down 26.4 per cent – and Ireland where sales fell 7.4 per cent.

Sales for across Harvey Norman for the four months were up 6.9 per cent and comparable sales were better by 6.3 per cent.

The gains at Harvey Norman’s Australian stores, which form the bulk of the retailer’s operations, reflect continued strength in consumer spending for discretionary purchases despite seven interest rate rises by the RBA since May and accelerating inflation which is squeezing household budgets.

JB Hi-Fi revealed similarly strong growth in first quarter trading. At its annual meeting in October, JB Hi-Fi said its Australian arm had recorded first quarter sales growth of 14.6 per cent, compared to its 7.5 decline in the prior corresponding period. The Good Guys, owned by JB Hi-Fi and which competes in similar categories to Harvey Norman, was also recovering strongly between July 1 and September 30, with its comparable sales up 12.3 per cent.

Meanwhile, CEO Katie Page outlined new plans for the company to expand in Malaysia. Harvey Norman has the opportunity to grow from 28 stores currently to 80 stores by the end of 2028, the company said. This would see it overtake New Zealand as its largest overseas business.

The first store in Malaysia was opened in 2003 and Harvey Norman has doubled store numbers to 28 in the last five years.

Ms Page said Malaysia has a thriving post-pandemic economy, strong GDP growth, low unemployment and attractive demographics in terms of population and the median age of the population which was 30.4 years.

“We have an experienced team in place in Malaysia with extensive retail experience and tenure with our brand to deliver the Malaysian expansion plans over the next six years,” she said. “This highly-skilled local team will bolster the infrastructure required to deliver the growth opportunities in areas such as IT, warehousing, property, finance, HR and marketing. The intention is to fund the … expansion plans through operating cash flows and existing cash reserves in Malaysia.”

The meeting saw a 22.38 per cent vote against the re-election of David Ackery and a 21.41 per cent vote against the re-election of Kenneth Gunderson-Briggs.

Harvey Norman shares closed down 1.4 per cent, or 6c, on Thursday at $4.17.

Originally published as Harvey Norman books strong sales growth amid ambitious expansion plans in Malaysia