Harvey Norman can ride out storm: Gerry Harvey

Retailer the biggest loser amid sell-off panic, and Gerry Harvey says he is bracing for ‘a lot worse’.

Harvey Norman chairman Gerry Harvey Picture: Chris Pavlich

Harvey Norman chairman Gerry Harvey says the local bourse has taken a “a bloody hiding” as fears of a coronavirus pandemic spread through global equities markets, with the retailer’s shares dropping 14 per cent on Friday to be the biggest loser on the leaderboard.

The billionaire retail mogul conceded that while his overseas Harvey Norman stores were posting record profitability, he was disappointed with the performance of his flagship Australian stores for the December half, admitting it was becoming difficult to match last year’s sales and earnings figures.

But he added an upbeat assessment of the retailer’s ability to ride out the storm, saying the business had witnessed no disruption to its supply chain out of China, had plenty of stock on hand or being shipped, and that rising residential property prices should help underwrite an improving second half.

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The furniture, consumer electronics and whitegoods retailer posted a 4.1 per cent drop in its interim net profit to $213.59m as the weakened value of its property portfolio, especially in residential zones in NSW, weighed on the company’s profitability, while the bushfires and poor consumer confidence also disrupted foot traffic at its stores.

Profit before tax was $301.15m, a fall of 4.6 per cent, while sales revenue rose 1.9 per cent to $4.07 billion. Same-store sales growth for the December half was 1.6 per cent.

However, in a worrying sign of a tougher second half, a sales update revealed same-store sales growth had reversed between January 1 and February 27 to be down 3 per cent, while the coronavirus outbreak looks to have smashed sales in Singapore, where Harvey Norman’s revenues tanked 11.5 per cent.

Harvey Norman shares paid the price, falling 14.1 per cent to a 12-month low of $3.71. “It might get a lot worse the way thing are going. These are one of these times when it (the market) gets a bloody hiding,’’ Mr Harvey told The Weekend Australian.

Harvey Norman also invests in property and shares, but Mr Harvey said it was unlikely the retailer would be filling its boots with stocks as the correction sweeps through equity markets.

“Harvey Norman probably won’t be buying anything much at the moment. I might buy something. That is a different thing altogether. I am a buyer and seller in the market all the time.’’

Mr Harvey said he was not facing any issues sourcing product out of China, with shipments through to March and April looking on track. But the coronavirus and generally flat economic conditions were making it harder for Harvey Norman to lift its earnings on last year. “I’ve spent every day for the last two weeks ringing stores and talking to our people, trying to figure if anything is happening and what do they think is going to happen,” he said.

“It’s pretty much business as usual at the moment and I’m not getting any feedback from any of them saying ‘oh shit, I’m scared’. But we have been saying all year we are battling to get last year’s figures in a greater majority of shops. Some are doing quite a bit better and some are doing quite a bit worse, but overall trying to get last year’s figures is a battle.

“I’m pretty happy with how we are going overseas. I’m not quite as a happy with the result we have got here. I would have liked that to be at least marginally better, so just 1 or 2 per cent better would have been OK.’’

Harvey Norman in Europe and Asia continues to be an earnings powerhouse, with overseas profits up 5.4 per cent to $81.69m.

It said Australian franchises were hit by the widespread bushfires and severe reductions in air quality that affected many communities and that coincided with peak Christmas trading.

It declared an interim dividend of 12c a share, flat with last year, and payable on May 4.