The Harvey Norman Holdings share price has fallen further this week, as investors absorb the impact of the drama unfolding around the failure of the retailer’s biggest franchisee, who operated Harvey Norman Commercial in NSW, which has been described as “the most profitable” store in the global HN network but went into administration overnight.

To date neither Chairman Gerry Harvey or CEO Katie Page have commented on the collapse of their biggest franchisee.

ChannelNews understands that suppliers that are owed money have also not heard from Harvey Norman management or the new franchisee of Harvey Norman Commercial.

During the past six months the HN share price has fallen close to 20%, with analysts claiming that the market is not fully reflecting the potential negative outcome tipped by the mass retailer for later this year or the impact of the fallout from the HN Commercial saga.

This could result in further share dips if earnings disappoint, or the business is impacted by the failure of one of their most successful franchisees.

Analysts Mitchell Lawler, from Motley Fool, claims that the Companies recent profit decline occurred “Arguably before the ‘real’ impact of higher interest rates has flowed through to households”.

He wrote “I think Harvey Norman could see further pain in Australia over the rest of 2023 if/when higher interest rates bite.”

I don’t think Harvey Norman shares are permanently going to go to $3 (or under) – discretionary retailers sometimes see demand shift over time. The company’s international growth is helping its long-term potential, but its core market of Australian retailing looks wobbly”.

He also claims that higher interest rates could push down the value of Gerry Harvey’s property portfolio and this “could prove to be a headwind” for the Harvey Norman property portfolio.

Currently Harvey Norman is now trading on roughly its book value due to recession fears.

Lawler claims that “If consumer spending were to temporarily collapse, the balance sheet appears to be clean enough to get it through a tough stretch largely unscathed”.

 

H