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Harvey Norman Franchisees Struggle Despite Capital Investments

Harvey Norman franchisees who despite significant capital investment are still struggling following a $34.14 fall in profits, what is not known is the performance of the consumer electronics electrical and appliance franchisees Vs the furniture and home improvement franchisees who were hit earlier this year following a significant fall in the Australian property market.

Franchisee profits were down 12.1% to $248M Vs $282M in FY18.

According to the Harvey Norman annual report the franchisees segment of the Companies overall operation was impacted by a $21.82 reduction in revenues from $965M to $942M in FY19.

The Company claims that the key drivers for consumer discretionary spending, population growth, consumer confidence, household income and property prices are not expected to represent an overall drag on the level of forward retail spending, with some key indicators showing early signs of improvement, the Harvey Norman annual report has claimed.

While the Companies overseas operations are reporting increased sales, the Australian operation is set to suffer from the “uncertainty” that still exists in the Australian market.

The Company claimed in their annual report that ‘while broader conditions remained challenging, there was hope for an upturn’ with one contributor being the forecast growth to 27M of the Australian population by 2023.

The Company said “Conditions remain challenging for households with household income rising by only 2.3 per cent year on year in the March 2019 quarter. However, it appears that Sydney and ­Melbourne dwelling prices have reached a trough which may limit any further negative wealth effects. Consumers remain ­moderately optimistic about the outlook, with the ANZ Roy Morgan confidence index recording a net positive outlook for the next 12 months.’’

Turning to its Asian and European operations, including Singapore and Ireland, Harvey Norman recorded offshore sales of more than $2bn in 2019, or 23 per cent of total group profit before tax. It said its Croatian business has been profitable for three full financial years, while in Ireland it planned to open two new stores next year.

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