Harvey Norman profit plunges over 30 per cent on spending slowdown

Retail heavyweight Harvey Norman has seen its full-year profits slide and sales slip at stores as it tackles rising costs and deteriorating consumer sentiment.

However, the company’s chairman Gerry Harvey remains upbeat about the retailer’s outlook, saying it was much better placed to weather any volatility in sales caused by the cost of living crisis, compared to other online furniture and electronics sellers.

The ASX-listed retailer revealed on Thursday its net profit after tax for fiscal 2023 had come in at $539.5 million, a drop of 33.5 per cent on the same time last year. Despite the drop, the group’s pre-tax profit exceeded the expectations it set in June, coming in at $776.1 million.

Almost a dozen retailers including Harvey Norman have issued profit downgrades.
Almost a dozen retailers including Harvey Norman have issued profit downgrades.Credit: Scott Barbour

Harvey said that most product categories within Harvey Norman stores had been affected as consumer sentiment declined, with the metro stores really feeling the pinch.

Harvey Norman executive chairman Gerry Harvey.
Harvey Norman executive chairman Gerry Harvey.Credit: Janie Barrett

“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 future outlook for the business.

The company has delivered profit growth of about 35 per cent between 2019 and 2023, and Harvey said the retailer was primed to benefit from shoppers curbing their spending online in favour of in-store shopping.

While online retail thrived during the COVID years, pure play e-commerce businesses are now struggling while Harvey Norman’s physical stores were resilient, he said.


“People have been talking about online now for 20 years. What happened with our online business is it went through the roof during the pandemic, then dropped dramatically,” he said.

“You look at those online players that were going to take over all the business – they are [now] going out of business day by day, across the world.”

The retailer on Thursday pointed to “progressively worsening macroeconomic conditions and cost of living pressures this year”, with revenue at the company’s franchise operations down by 10.7 per cent for the year to $1.07 billion.

Profit before tax at Australian franchise stores was down by 32.5 per cent to $373.4 million.

The profitability of Harvey Norman’s global operations also declined throughout 2023, with profit before tax declining 40 per cent to $139 million.

A trading update on sales for the month of July revealed that conditions continued to be softer in the first months of the new financial year, with Harvey Norman’s global markets posting a drop in comparable sales compared with 2022. 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.

The company first gave a warning about its results in June, when it revealed in a trading update that it expected pre-tax profit in the range of $637 million and $703 million. Its final profit before tax figure exceeded these expectations, coming in at $776.1 million.

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 conditions to remain challenging for some time. 

Harvey Norman shares opened lower but were up by 1.8 per cent just after 10.30am to $3.91.

Harvey Norman shareholders will see 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