Harvey Norman Chairman Gerry Harvey has been dropping hints lately, that he may be open to selling the big global retail business or part of it, but the big question that analysts are asking is whether the business is worth investing in.

Analysts claim that “On the whole, Harvey Norman Holdings’ performance is quite a big let-down. The company has seen a lack of earnings growth as a result of retaining very little profits and whatever little it does retain, is being reinvested at a very low rate of return” investors were told recently by Simply Wall Street Analysts.

As of yesterday Tuesday, Harvey Norman shares were down 2.24% for the last six months.

Some analysts are not only concerned about the management of the Company but the return on investment for investors.

At first glance, Harvey Norman Holdings’ ROE doesn’t look very promising.

Yet, a closer study shows that the company’s ROE is similar to the industry average of 7.9%.despite Harvey Norman Holdings reporting a flat net income growth over the past five years.

Some analysts believe that Harvey Norman who reported a 90% fall in profits recently has failed to deliver earnings growth as a result of retaining very little profits and whatever little it does retain, is being reinvested at a very low rate of return.

While some are looking for a big improvement due in part to new products flowing through into stores in the last quarter, and categories such as AI notebooks delivering a lift in sales.

Currently Harvey Norman Holdings is forecast to grow earnings and revenue by 9.1% and 11.5% per annum respectively.

EPS is expected to grow by 8.6% per annum.

Return on equity is forecast to be 10.3% in 3 years.

Currently the business is facing not one but two class action claims over questionable extended warranty sales, then there is the issue of the way that the Company markets their ‘Interest Free’ financing which the business has been punting on to attract consumers under financial pressure.

Senior executives at Harvey Norman and Latitude Finance allegedly signed off on a marketing campaign, spruiking no interest and no deposit credit cards, in an advertising blitz that attracted the attention of Australian Competition & Consumer regulators who have taken action against the retailer.

The ACCC is also taking action against Big W owners Woolworths and Coles for their discounting programs, they allege Coles and Woolworths temporarily increased the prices of 245 and 266 products respectively for short periods, before placing them on “Down Down” and “Prices Dropped” promotions.

They are also accused of manipulating many staples of ordinary and low-income families.

In the consumer electronics and appliance market retailers have been known to run promotions at one price for a number of weeks and then move to discount marketing for the same product weeks later a move that is legal.

In the Latitude Harvey Norman case that the ACCC are pursuing, it’s alleged Harvey Norman and Latitude aggressively pushed a financing scheme across television, print, and radio advertising but left in the small print revealing the need to sign on to a potentially high interest credit card vague and often unsaid.

Last week Harvey Norman admitted that it and its subsidiary Yoogalu received an ‘originating application and statement of claim’ about a class action relating to products with Product Care rights sold by franchisees to customers.

Harvey Norman said the proceedings include claims for compensation for an unspecified amount, interest and costs for the lead plaintiff and class action group members.

As a result of these claims and the targeting of the business by scammers analysts are concerned as to the future of the business.

Recently Harvey Norman was supposedly giving away free laptops to anyone aged over 25 due to a sorting centre error, social media posts claim.

This is false.

The posts were part of a scam aiming to collect Facebook users’ personal information and financial details.

The claims appear in posts on Facebook featuring stock images of stacks of HP laptops.

The posts were linked to fraudulent websites, claiming users had won a giveaway before asking for their personal and banking details.

Harvey Norman was forced to warn consumers about the posts falsely claiming it was giving away free products.

Recently I spent some time in Harvey Norman’s Bundall Store on the Gold Coast, it was bussing with people and the staff were extremely good, knowledgeable and the store was packed with the latest appliances and consumer electronics goods.

Despite this one had to question as to the way some goods were merchandised in store and whether suppliers were getting a return for their investment with one instore display blocked by other appliances.

Roger Montgomery of Montgomery Investments said recently “While higher income earners are driving spending, lower income groups are tightening their belts, focusing on essentials like utilities and mortgages. Data from UBS and Finder reveals consumer trends remain resilient despite economic uncertainty. Retailers like JB Hi-Fi (ASX:JBH) and Nick Scali (ASX:NCK) have shown strong performance by gaining market share, particularly through overseas expansion, whereas others, like Harvey Norman (have lagged”.

“Looking ahead to Christmas and Black Friday sales, I expect steady spending from wealthier consumers, but a drop among lower-income households, highlighting the challenges ahead for the retail sector”.