Harvey Norman has delivered a $790.29 million full-year profit before tax, with booming international operations and its Australian franchise network helping the retailer overcome softer trading conditions during the second half of the financial year.

The result for the year ended June 30, 2026, represents a 4.9% increase in reported profit before tax, while underlying earnings grew at more than twice that rate.

On a normalised basis, stripping out property revaluations and lease accounting impacts, profit before tax increased 10.9% to $654.69 million, highlighting the improvement in the underlying retail and franchising operations.

Total system sales across Harvey Norman’s operations increased 3.1% to $9.64 billion, with the retailer benefiting from demand across technology-led categories, including emerging Next Gen-AI products, as well as additional sales generated by its expanding international store network.

The result reinforces the growing importance of Harvey Norman’s overseas businesses as the Australian retailer increasingly looks outside its home market for earnings growth.

Company-operated international retail operations delivered a 23.4% increase in profit before tax to $135.72 million.

Gerry Harvey

When the costs associated with Harvey Norman’s strategic expansion into the UK are excluded, its established international operations across New Zealand, Asia and Europe generated $166.93 million in profit before tax, an increase of 25.2%.

Those established overseas operations now account for more than a quarter of Harvey Norman’s normalised earnings, significantly reducing the group’s historic reliance on the Australian franchise business.

Chairman Gerry Harvey said the result reflected strong operating earnings, international expansion and continued profitability from its Australian franchisees.

“FY26 delivered growth in operating earnings, continued international expansion and strong franchise profitability,” Harvey said.

Harvey Norman is one business unworried by the AI revolution

Management attributed much of the result to a strong first half, with cost controls helping the business absorb inflationary pressures during the year.

The performance comes as Australian retailers continue to navigate a difficult consumer environment characterised by cost-of-living pressures, elevated operating costs and consumers becoming increasingly selective about discretionary purchases.

Franchise Operation wobbles

Harvey Norman’s Australian franchising operation remained highly profitable but failed to deliver the earnings growth being generated internationally.

The Australian franchising segment reported profit before tax of $345.18 million, broadly in line with the previous financial year, after trading conditions weakened during the second half.

Revenue from the franchising segment nevertheless increased 4.3% to $1.09 billion, supported by increased franchise fee income and rent.

The numbers highlight the unusual structure of Harvey Norman’s Australian business.

Rather than operating most Australian stores directly, Harvey Norman generates substantial income from independent franchisees operating under its retail brands, while the listed company also owns a significant portfolio of the properties from which many stores operate.

This combination of retail, franchising and property ownership continues to differentiate Harvey Norman from major Australian competitors including JB Hi-Fi and The Good Guys.

It also means Harvey Norman’s headline earnings can be heavily influenced by movements in property valuations.

For FY26, Harvey Norman’s property division generated profit before tax of $333.49 million, an increase of 3.7%.

That figure included a $156.75 million net property revaluation increment, demonstrating the significant contribution the group’s property portfolio continues to make to reported earnings.

The property assets also provide Harvey Norman with one of the strongest asset-backed balance sheets in Australian retail.

Total assets are now approaching $9 billion, while net assets stood at $4.94 billion at the end of the financial year.

Conservative Gearing

Despite continuing to invest in international expansion and property, Harvey Norman maintained relatively conservative gearing, with its net debt-to-equity ratio sitting at 18.8%.

Operating cash flow remained strong at $537.22 million for the year, giving the company considerable capacity to fund store expansion, property investment and shareholder distributions.

The international numbers are particularly significant because Harvey Norman has been steadily building a retail footprint outside Australia at a time when growth opportunities in the mature Australian consumer electronics and appliance market are becoming harder to secure.

The company now operates across markets including New Zealand, Singapore, Malaysia, Ireland, Slovenia and Croatia, while its move into the UK represents another potentially significant growth platform.

However, the UK expansion is initially acting as a drag on international profitability as Harvey Norman invests in establishing the business.

The difference between the $135.72 million profit generated by the total company-operated retail segment and the $166.93 million generated by established international operations excluding the UK expansion highlights the cost of establishing the new market.

Management is effectively betting that the upfront investment will produce another meaningful earnings contributor as the UK store network develops.

The 25.2% increase in profit from established international markets suggests Harvey Norman’s offshore strategy is already becoming increasingly important to group earnings.

It also provides the retailer with geographic diversification at a time when conditions in Australia remain mixed.

The Australian business remains critical, however, with the franchising division’s $345.18 million profit demonstrating the cash-generating power of the Harvey Norman model despite the absence of meaningful profit growth during FY26.

Technology is also emerging as an increasingly important driver of replacement demand.

Harvey Norman identified Next Gen-AI products as one of the categories contributing to sales momentum during the year as manufacturers push AI-enabled notebooks, smartphones, televisions and other connected devices into the market.

The retailer’s exposure to premium consumer electronics and appliances potentially positions the business to benefit from another technology replacement cycle as manufacturers increasingly use artificial intelligence functionality to encourage consumers to upgrade existing products.

Facing Aggressive JB Hi Fi

At the same time, Harvey Norman faces aggressive competition from JB Hi-Fi and The Good Guys in Australia, particularly across computers, televisions, mobile devices, appliances and other technology categories.

The latest result shows that Harvey Norman is increasingly relying on a combination of international expansion, franchise income and its substantial property portfolio to generate earnings growth rather than depending solely on Australian retail sales.

That diversification proved valuable during FY26.

While Australian franchising earnings were broadly flat, established international operations delivered double-digit profit growth and property earnings increased.

The result leaves Harvey Norman with a substantial asset base and relatively modest gearing as management continues its international expansion strategy.

Shareholders will also receive an increased return from the year’s earnings, with the board declaring a fully franked final dividend of 13 cents per share, payable on November 12, 2026.

With normalised profit increasing 10.9%, international earnings accelerating and almost $5 billion in net assets sitting behind the business, Harvey Norman enters FY27 in a strong financial position.

The bigger question for the company is whether its Australian operations can return to meaningful earnings growth as consumer conditions improve, or whether the increasingly important international division will continue to carry a larger share of Harvey Norman’s future growth.