Harvey Norman has full inventories from Australia to Croatia and is ready for shoppers to spend up this Christmas

Extensive lockdowns and store closures has smashed Harvey Norman’s sales and profit, but it is ready for the Christmas rush and is not facing supply chain issues like other retailers.

Harvey Norman, which is chaired by Gerry Harvey and run by his wife Katie Page, report a drop in sales and profits due to lockdowns. Picture: Sam Ruttyn

Harvey Norman has stood apart from the rest of the retail sector warning about disrupted global supply chains putting the brakes on products being shipped to Australia, saying it was well stocked across all its stores for the looming Christmas rush.

Chief executive Katie Page said that not just in Australia but across its operations in Asia and Europe it had built up its inventories to capture consumer sales as they emerge from their homes after months of lockdowns and are cashed up and ready to spend.

“We are in eight countries, people forget we are not just in Australia. We are really comfortable and confident with the inventory levels that the franchisees and the company owned stores are holding going into that peak period,” Ms Page told The Australian after Harvey Norman’s annual general meeting on Wednesday.

“Everyone is talking about supply chain, not just in retail but every industry, and we have managed this, we were talking about supply chain challenges at the end of January 2020 when in Wuhan the Chinese new year was effectively cancelled because the outbreak happened.

“So we have had and the world has had these issues for 20 or 22 months, and businesses have had to be really savvy and smart on how they have managed this and we are really comfortable with our eight countries, where they are sitting, company owned and franchisees, with inventory.”

It comes as retailers in particular are seeing their supply chains strangled recently as logistics and transportation freezes up. Rip Curl has warned of a shortage of wetsuits, fashion retailers worried about their apparel supplies and even on Tuesday the nation’s largest brickmaker Brickworks warned it recently came within weeks of totally running out of imported pigments used to colour stain bricks.

Ms Page said the biggest risk through the Covid-19 pandemic had been to the supply chain and as different countries get locked down “you really had to be on your game”.

“I think it will be interesting in December and January, if you are seeing now that you have got retailers that are going out and saying they have supply chain issues then it is going to be very difficult for them in December and January.”

Meanwhile, Ms Page said sales across its stores, from Australia to Croatia, have accelerated since August as consumers enjoy their new freedoms and want to “touch and feel” the merchandise with the retailer fully stocked up for a bumper Christmas trade.

Ms Page told The Australian she had recently returned from a tour of the consumer electronics, furniture, bedding and kitchen appliances retailer’s operations in Europe and had witnessed first hand the desire for shoppers to escape lockdowns and experience the theatre of retail.

“They are showing us they want to shop with us in shops, they want to see the products, they still want to shop online for convenience etc but they don’t want to be pigeon holed where they are told to do one thing or another,” Ms Page said.

However, the lockdowns that were imposed across New South Wales and Victoria had cast a pall over its sales and profitability between July and November as Harvey Norman suffered a stinging 11 per cent slide in its sales and a more than one third drop in its underlying earnings.

In a trading update provided to the market before the Harvey Norman AGM the company did reveal that its sales and profits for the five months to the end of November had climbed strongly when compared to the same period in 2019 — before Covid-19 emerged — but the retailer had felt the pain of lockdowns when holding up the latest results to 2020.

The retailer, which has seen its business boom through Covid-19 as consumers filled their homes with new furniture, bedding, TVs and kitchen appliances, said that between July 1 and November 21 its Australian store network had been impacted by the lockdowns and store closures.

Its Australian stores posted an 11.3 per cent slide in total sales for the period and an 11.1 per cent fall in like for like sales compared to the same time in 2020. Against its performance in 2019 total sales were up 15 per cent and comparable sales better by 16.1 per cent.

New Zealand also saw like for like sales in the five months to November fall 5.7 per cent, Slovenia and Croatia stores were down 4.1 per cent and Singapore same store sales down 2.3 per cent.

Across the entire company, total sales for the five months to November were down 8.8 per cent but against 2019 were up by 16.9 per cent.

However, Ms Page said she was gaining confidence from the acceleration of sales from August.

“I am really comfortable with how these sales have accelerated since August,” she said.

Since August for example sales for Australian franchisees from July to August were down 19.2 per cent but were now down 11.3 per cent through to November.

The company said in its trading update that unaudited preliminary accounts for the consolidated entity for the period July 1 to October 31 indicate profit before tax and non-controlling interests of $217.42m compared to $337.11m for the same period last year, a decrease of approximately 35.5 per cent.

When compared to profit before tax and non-controlling interests for the period July 1, 2019 to October 31, 2019 of $127.84m, unaudited preliminary profit of $217.42m for the period has increased by approximately 70.1 per cent.

At the AGM there was a 24.64 per cent vote against the re-election of Michael Harvey as a director, a 24.9 per cent vote against the re-election of Christopher Brown and a 27.17 per cent vote against the re-election of John Slack-Smith — but all directors were re-elected.

Shares in Harvey Norman ended down 9c at $5.10.