Harvey Norman chair Gerry Harvey isn’t tipping a retail boom from stage 3 tax cuts

Retail billionaire Gerry Harvey has warned the windfall tax relief flowing from the revamped Stage 3 tax cuts from July 1 won’t trigger a boom for the retail sector.

Retail billionaire Gerry Harvey has warned the windfall tax relief flowing from the revamped Stage 3 tax cuts from July 1 won’t trigger a boom for the retail sector, as cost of living pressures see households save much of that extra cash rather than spend it on consumer electronics, furniture or whitegoods.

Meanwhile, the co-founder and chairman of Harvey Norman is eyeing off a potentially new market in England – to complement a renewed push into Malaysia – with the retail chain to open its first store in the English Midlands later this year in what Mr Harvey has dubbed a “potential gold mine” if the brand takes off there.

Mr Harvey said it was always Harvey Norman’s intention to push into England after first establishing in Ireland and Northern Ireland, where it currently has 18 stores. The move was delayed for a few years, but now the retailer is ready to jump across the Irish Sea and potentially move on half a dozen locations for Harvey Norman stores.

“That could really be something great for us, or it might be a fizzer, but it has the potential to be anything … if we can open one to four shops over there and they go really well, the potential for that is really huge – it could be bigger than Australia,” Mr Harvey told The Australian as Harvey Norman recorded revenue of $2.15bn for the first half, down 8.2 per cent, as profit dropped 29 per cent to $213.9m

Harvey Norman is the largest whitegoods, furniture and bedding chain in Australia, where it has just under 200 stores, and it is steadily harvesting more sales and earnings from offshore.

Harvey Norman already operates across eight countries, including New Zealand, Malaysia, Singapore, Croatia and Ireland, but its retail chains are facing headwinds in many of those regions – including Australia – as cost of living pressures, inflation and interest rates hamstring shoppers.

The retailer’s half-year results were considerably weaker, reflecting those economic challenges.

However, the profit was ahead of market expectations, as was the dividend.

The retailer declaring an interim dividend of 10c per share, down from 13c, and payable on May 1.

Harvey Norman chairman Gerry Harvey doesn’t expect a retail boom from stage 3 tax cuts. Picture: Glenn Hampson.

At the end of the half Harvey Norman had net assets of $4.51bn, up almost one third, and it had a property portfolio worth $4.14bn.

Mr Harvey said the drop in sales and earnings over the December half was not unexpected as the pandemic dragged forward many purchases, with that huge build-up finally catching up with the retailer.

In Australia, where the bulk of its stores are located, profit before tax was down 39.8 per cent to $143.08m. Pre-tax profits from its collection of overseas stores fell 23.5 per cent to $76.18m, impacted by persistent macroeconomic headwinds, especially in New Zealand, that continued to dampen consumer and business confidence. The ongoing inflationary pressures and geopolitical tensions across Asia and Europe decreased store foot traffic and homemaker spending, the retailer said.

The outlook had improved, however, led by Australia, with sales here up by 0.6 per cent in January against double-digit sales declines through much of the first half. Mr Harvey said Harvey Norman had an improved performance in Australia heading into Christmas, and while February and March were typically quiet months for the retailer, he tipped continued positive sales momentum through to July.

Better than expected profit and dividend together with signs of improving sales from January helped send Harvey Norman shares up more than 5 per cent to $5.09 in morning trade. The stock later closed up 21c at $4.95.

Despite Mr Harvey’s more upbeat outlook for the rest of calendar 2024, he was sceptical that the revamped Stage 3 tax cuts starting from July 1 would lead to a spending boom for his retailer or the wider retail sector.

“I think that impact will be minimal, in terms of consumer confidence it won’t do any harm, but I don’t think there will be some huge injection into the economy,” he said.

“Costs have gone up too much for everyone, costs for our shops have gone through the roof … most costs are going up all the time. Power (bills) is a problem across the whole country.”

But nonetheless, Harvey Norman was well-positioned in terms of demographics, population and its own balance sheet to perform well through the cycle.

“We are well-positioned to benefit from growth in the homemaker categories and an improvement in residential property activity. Our strong balance sheet and prudent financial management provides us with the capability to access additional capital to adapt to evolving business needs,” Mr Harvey said.

Apart from a maiden expansion into England, with its first store to open later this year in the West Midlands, Harvey Norman is also focused on growing its presence in Malaysia and expects to have 80 stores by the end of 2028.

Originally published as Harvey Norman chair Gerry Harvey isn’t tipping a retail boom from stage 3 tax cuts