Harvey Norman profit rises, Ireland still ‘terrible’
Published 26/02/2010 | 10:57
Australia’s biggest furniture and electronics retailer Harvey Norman has said first-half profit rose 60pc on domestic demand for televisions and after year-earlier charges weren’t repeated.
Net income rose to A$158.9m (€104m) in the six months ended December from A$99.3m a year earlier, the company said in a statement today.
A buoyant Australian housing market, with December home-building approvals up 53pc on the year earlier, is driving sales of appliances and furniture for Harvey Norman and helping it withstand “terrible” losses in Ireland.
After not opening any new domestic stores in the half, Executive Chairman Gerry Harvey, plans to resume expansion, including teaming with Ikea in 2012 for a retail complex in Melbourne’s eastern suburbs.
“Harvey Norman’s first-half result shows a recovery in margins, driven by its franchise segment,” Craig Woolford, an analyst at Citigroup, said in a report to clients today.
“We expect the company’s sales growth to outstrip many discretionary retail rivals over the next six months, given Harvey Norman’s leverage to the housing sector,” wrote Woolford, who rates the stock “hold.”
Harvey Norman rose 1.6pc to A$3.83 at the close of trading on the Australian Securities Exchange. The stock has fallen 9.2pc this year.
The retailer was projected to post earnings of A$160.5m, according to the median estimate of four analysts surveyed by Bloomberg News.
Hoping & praying
Earnings before items and tax rose 47pc to A$237.8m, beating the company’s forecast for a 40pc increase.
The company's Irish operations, which feature company-owned stores, narrowed its first-half pretax loss to A$17m from A$19.8m a year earlier.
“It’s terrible, we’ve got a situation where we are losing a lot of money in Ireland and it’s not improving,” Harvey, 70, said in an interview with Bloomberg Television today.
“I’m not counting on it improving, I’m counting on it staying as bad as it is and hoping and praying it gets bit better.”
Pretax earnings from the franchising division, which generates three quarters of Harvey Norman’s revenue, rose 23pc to A$186.8m.
“Despite aggressive competition and discounting, the franchising operations segment result has benefitted from the resurgence of the furniture and bedding categories on the back of the strengthening domestic housing market,” the company said.
Harvey Norman has 265 stores in Australia, New Zealand, Ireland, Slovenia and Singapore.