Harvey Norman Got Its Mojo Back?
Harvey Norman appears “solid” after its latest fy14 performance showed improved sales globally and profits up 20%, say analysts.
Global sales rose 3.5% although growth across Australian franchises wasn’t as robust – up 1% to $4.77 billion for fy14, it announced Friday.
Overall, the improvement in Harvey’s franchise operation appeared to be due to the closure of loss-making franchisees, according to Credit Suisse analyst, Grant Saligari.
A total of eight franchise complexes closed in the 12 months to 30 June. Six company-owned stores were opened globally all outside Australia.
However, Harvey’s franchisee sales increased in the latter part of the year – up 2% in 4Q14 (3.6% in 3Q), citing increasing use of data analytics and customer engagement as contributing to the improvement.
The retailer also delivered an upbeat outlook for fy15, banking on continuing strong sales of households goods.
The outlook reflects a combination of prospective cost and working capital benefits from system changes and a strong households goods spending environment although was unquantified, analysts noted.
NPAT of $212m was ahead of market forecasts placing it at $203 million median and marked a 20% rise from fy13.
Analysts gave the retailer a ‘Neutral’ rating. Shares rose today to $3.67 – up 3.4%.
Harvey Norman also has an advantage over rivals Dick Smith and JB Hi-Fi and is less exposed to a slowdown in sales of popular tech like tablets, which saw JB H-Fi suffer in its latest results.
“HVN’s exposure to consumer electronics and particularly information technology is low relative to JBH and DSH and therefore is less impacted by the slowdown in technology product release and tablet demand present in those results,” said Saligari.
“A relatively high exposure to household goods demand differentiates HVN as an investment opportunity. “
The retailer is introducing a number of changes to systems through FY15 which provides the potential for a lower cost base and efficient management of working capital, benefits which will come to fruition in Fy16, Credit Suisse analysts noted.
“With a robust outlook for the housing market in Australia, we are well-placed to harness our market-leading position in the homemaker categories to build market share and deliver improved performance,” Chairman Gerry Harvey said Friday.
“Market conditions, together with our consistent strategy and operational focus, gives me confidence in the outlook for Harvey Norman.”