Retail heavyweight Harvey Norman has seen its full-year profits slide and sales slip at stores in the face of cost-of-living pressures, but chairman Gerry Harvey says the company has an advantage over its competitors as online retail slows.
The ASX-listed retailer revealed on Thursday its net profit for fiscal 2023 had slumped by a third to $539.5 million. Despite the drop, the group’s pre-tax profit exceeded expectations set in June, coming in at $776.1 million.
Harvey said that most product categories within Harvey Norman stores had been affected as consumer sentiment declined, with the metro stores in particular feeling the pinch.
“Our country stores are going better than our city stores… In the city, the cost of rent, electricity, has gone up considerably.”
But he was unfazed about the outlook for his business, saying its competitive position could only improve as online-only retailers struggled in the post-COVID period.
“You look at those online players that were going to take all the business – they are going out of business day by day, across the world,” he said.
Harvey noted predictions that retail juggernaut Amazon would eat into Harvey Norman’s position had also been overblown.
“When Amazon came there was article after article about how Amazon was going to sell all the fridges in Australia. That hasn’t eventuated at all.”
It’s been a challenging earnings season for online-only retailers as companies saw demand moderate from the years of COVID lockdowns. Online furniture seller Temple & Webster posted a 30.6 per cent decline in full-year profit to $8.3 million, while cosmetics retailer Adore Beauty swung to a $500,000 loss.
In another signal of flagging online retail sales, fashion website The Iconic announced on Thursday it had made 72 roles redundant, or about 7 per cent of its workforce. It brings its total number of job losses this year to nearly 150, following an earlier round of redundancies in February.
The e-tailer, which was recently taken over by new chief executive Jere Calmes following the departure of Erica Berchtold, recorded softer-than-expected sales last quarter, reporting a 9 per cent drop in net merchandise value.
A spokeswoman said the company was consulting affected staff over the coming week to review any opportunities for redeployment within the business, which employs around 800 people.
Berchtold left The Iconic to take up the top job at Best & Less but that fell through when the discount chain became the subject of an off-market takeover by veteran retailers Brett Blundy, of the Sanity music brand, and Ray Itaoui.
Retail sales figures from the Australian Bureau of Statistics released this week show overall retail spending increased by 0.5 per cent in July, but underlying growth in the retail sector remains subdued with household goods sales continuing to decline.
A trading update on Harvey Norman’s sales in July also points to a tougher outlook, with comparable sales down in all of its global markets. Australian franchise sales were down by 12.6 per cent, while New Zealand stores had dropped by 4.7 per cent compared to last July.
Rival ASX-listed electronics retailer JB Hi-Fi surprised the market earlier this month with a better-than-expected result, but chief executive Terry Smart was under no illusions about the conditions, saying the company expects them to remain challenging for some time.
Harvey Norman’s profit drop wasn’t enough to spook investors, however, with the stock up 4 per cent in early afternoon trade as the overall numbers beat analyst expectations.
E&P Capital’s Philip Kimber said the result was mixed. “The Australian Franchisee [segment] was better than expected, but the offshore businesses were generally worse than expected,” he said.
Shareholders will receive a final dividend of 12.5 cents per share, down from 17.5 cents last year, to be paid on November 13.
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Source: Thanks smh.com