Harvey Norman saw a first-half dip in profits, and despite assuring investors of normalised trading conditions, the retailer has suffered through a 10.4 per cent downturn in January trading.
Net profit fell 15.1 per cent to $365.9 million, down by $65.01 million from the previous year.
First-half sales from its Australian franchisees were up a modest 2.1 per cent to $3.51 billion.
This was below forecasts of 5.6 per cent.
On a comparable store basis, sales growth rose 1.9 per cent in the period.
The weak performance in Australian stores was driven by a wetter-than-expected east coast summer, according to Harvey Norman, which led to “a substantial decrease in the sales of seasonal products”.
Electrical and Furniture franchisees saw a slump in air conditioning units, fans, air treatment units, outdoor furniture and barbeques.
Interestingly, Harvey Norman also portioned some of the blame for the slow first half on the Optus breach.
“The technology franchisees have a strong partnership with Optus,” the financial presentation notes.
“Initially, the Optus business with franchisees remained resilient, but by November 2022, the news surrounding the attack had an adverse impact on the technology franchisees and the Optus partner.”
Operating margins are also an issue, having shrunk from 8.53 per cent a year earlier to 6.78 per cent, due to increased advertising and operational costs.
EBITDA was $694 billion, a fall of 8 per cent, while total revenue hit $4.98 billion.
Profitability of the franchising operations segment declined by 18.9 per cent, or $55.21 million, to $237.65 million for 1H23, compared to $292.85 million for 1H22.
The group will pay a fully franked interim dividend of 13c per share on May 1, well below the expected 18.2c.
“Despite the macroeconomic headwinds and cost of living pressures affecting discretionary retail, our strong balance sheet and our substantial growth in net assets throughout the pandemic has left us in a solid position to withstand these challenging circumstances,” Gerry Harvey said of the results.
January sales have not shown Harvey Norman to be in a solid position, with sales in Australian stores down 10.2 per cent compared to January 2022.
Shares are down by more than 8 per cent this morning, as of 10:45am, and are likely to crash further.
Harvey Norman shares have dropped more than 25 per cent in the past year, losing over 14 per cent in the past 30 days.
