JavaScript disabled. Please enable JavaScript to use My News, My Clippings, My Comments and user settings.

If you have trouble accessing our login form below, you can go to our login page.

If you have trouble accessing our login form below, you can go to our login page.

Harvey Norman hit by aggressive competition

Date

Harvey Norman's pre-tax profit for the first nine months of the financial year is down 25 per cent as sales continued to fall in the first quarter.

The retailer's shares fell 4.8 per cent, or 10 cents, to $1.97.

The company said its profit before tax and minority interests for the nine months to March 31 was $204.8 million, down from $272.3 million in the previous corresponding period.

The result clearly shows the impact of aggressive competitor activity in the audio/video and information technology sector, Harvey Norman said.

Morningstar retail and media analyst Tim Montague-Jones said retailers in general had been hit by a combination of cyclical weakness and discounting. Short-term factors such as a mild summer had also taken their toll on sales of air-conditioning units, which had hurt Harvey Norman.

"On the other side of the ledger there is a structural change happening, which these retailers aren't talking about," Mr Montague-Jones said. "We think there is a globalisation of commoditised products occurring."

"Commoditised electronics products are increasingly being purchased online and consumers are looking for the cheapest branded products there," he said.

Last week, JB Hi-Fi flagged weaker full-year net profit of between $100 million and $105 million, well below analysts' estimates of $119 million, because of heavy discounting prevalent in the local retail electronics sector. 

Sales retreat

Harvey Norman's global like-for-like sales in the three months to March fell by 3.8 per cent, taking like-for-like sales in the nine months to March down 6.6 per cent.

Australian like-for-like sales in the three months to March were down 2.8 per cent, and down 6.9 per cent for the nine months to March.

Australian sales were impacted by falling prices for technology products, particularly flat-screen TVs, due to the high Australian dollar and tough competition.

That competition has increased since the collapse of Queensland's WOW Sight and Sound and the scaling back of the Dick Smith Electronics business, Harvey Norman said.

Sales in April have continued the trend of the preceding three months, it said.

Mr Montague-Jones said the trend towards shopping online will continue to make life tough for many local retailers.

"A lot of those sales will go to the biggest global retailers, which are increasingly the Amazons of the world," Mr Montague-Jones said.

"The barriers for entry to retail have completely fallen, similar to what's happened in the media industry," he said, referring to the technology advances that have taken a wrecking ball to newspaper-focused business models.

AAP with Chris Zappone, BusinessDay

163 comments

  • I really hope Gerry Harvey holds fire and doesn't go on another popular media campaign about how people should stop paying off credit cards and run up more debt at his stores. Every time he goes on a rant I feel even less inclined to visit one of his franchises to furnish my new house. So far I haven't purchased anything from Harvey Norman due to the poor value and his media presence.

    Commenter
    Michael
    Location
    Adelaide
    Date and time
    May 03, 2012, 11:56AM
    • Stop your whinging everyone, it is all Ju-liar's fault! She needs to hand every Australian a $1,000 Harvey Norman gift voucher. Revenue for this should come from the taxing of all the international internet purchases... Problem solved!

      Commenter
      Gerry H
      Location
      AU, not overseas...
      Date and time
      May 03, 2012, 12:29PM
    • Just to correct you Michael, Gerry's issue is that Australians now love to penny pinch a couple of dollers here and there by buying overseas at the expense of the Australian economy and Australian families.

      You only need to look at the state of the economy to agree with him.

      Commenter
      Skimmer
      Location
      Wrong side of Town
      Date and time
      May 03, 2012, 12:33PM
    • @Skimmer, you mean it's unfair for customers to buy goods internationally at a lower price to Harvey but it's ok for him to buy goods internationally even cheaper and sell them to customers for a higher price than overseas customers pay?

      Commenter
      Mike
      Location
      Cremorne
      Date and time
      May 03, 2012, 12:41PM
    • When the government handed out cheques during the GFC, Gerry harvey sad despite most of all the money was spent buying goods from his stores, that this was the biggest waste of money spent.

      Then he's been lobbying the government to stop or make it more expensive for us all to buy over the net.

      He is a winger in every turn, and now he expect us to feel sorry for his failing umpire?!

      I feel sad for or the people working for him or in the Harvey Norman labelled stores people bought with hard earned money.
      This is long time coming for him.

      Shut it Gerry!

      Commenter
      A. Bolton
      Location
      Tasmania
      Date and time
      May 03, 2012, 12:53PM
    • Talk about getting "Harvey Norman" mentioned over and over again for free advertising.

      At least he's keeping the name in the public's mind.

      Commenter
      Canny
      Location
      Sydney
      Date and time
      May 03, 2012, 12:56PM
    • @skimmer, the fact is people are just not spending, and it's not because they are buying everything off the internet, it is just that they aren't spending because they have no money and too much debt.

      Commenter
      Les
      Date and time
      May 03, 2012, 12:58PM
    • @Michael
      Gerry Harvey's rants have the same effect on me.
      What they translate to when I hear them is something like: "Go out and run up debt to spend money in my shops (where everything is sold at huge margins) buying stuff that you do not need so that I can become an even richer man . . . you miserable ignorant peasant losers."
      The ordinary Australian worker is being screwed by a lying high-taxing government and greedy banks and there is no job security because the economy is collapsing. Also, we are about to get a big new tax on everything that will make everything much more expensive. Already very month thousands of homes are being disconnected by the power companies, because families cannot pay their basic utility bills . . . and Juliar is about to slug them with her carbon dioxide tax.
      Anyone who has an IQ about room temperature is devoting as much money as they can to paying off debt, so that they can live on the unemployment benefit they will claim after they lose their job.
      Amid all this, Gerry Harvey is pissing and moaning that we indolent peasants are not going into debt to make him a richer man.
      For some years I have been strongly disinclined to shop at Harvey Norman, even when I need something in that category . . . which is not often.
      Some of the competitors, such as JB HiFi, offer better prices anyway.

      Commenter
      CarlT
      Location
      crazy old cat man
      Date and time
      May 03, 2012, 1:00PM
    • @Skimmer, saving hundreds of dollars is not penny pinching. Having recently returned from the US, the cost of goods there is so much cheaper than here across almost all categories.
      For example (ok so not technology), I bought a pair of Asics Gel shoes for $100 at Foot Locker in NY. The exact same pair of shoes here is $189.99. I don't know about you, but saving $90 is hardly penny pinching.
      There is no value add to go into a HN store. The customer service is woeful, product knowledge from their staff is terrible and all they seemed to be trained to do (when you can finally make eye contact with one) is upsell and add on. It's so obviously all about lining Gerry Harvey's pockets.

      Commenter
      CeePee
      Date and time
      May 03, 2012, 1:05PM
    • HN has some of the strongest buying power in the country - if only they beefed up their online presence.... Not that that would help the franchisees and their employees.

      As for the franchises, if they ranged what I buy online (instead of just the mum & dad brochure lines) and could come close on price, I would much prefer to buy locally, support the locals and enjoy local warranties and convenience.

      Harvey,
      - There's a half dozen entry level, overly expensive lenses in your camera cabinet.
      - You're charging 400% of what computer components cost for upgrades.
      - Extended warranties are a joke.
      - Staff often not only don't know details, they state facts that are just plain wrong.
      - Do they still sell games, software and movies? I remember in my teens seeing stock that never discounted and was a complete rip off.

      Commenter
      jwp
      Date and time
      May 03, 2012, 1:25PM

More comments

Comments are now closed
Featured advertisers

Special offers

Credit card, savings and loan rates by Mozo

Executive Style