Harvey Norman posts profit increase but remains cautious

Retail giant, Harvey Norman, is maintaining a cautious outlook for the year ahead after posting a net profit increase of 9 per cent to $252.26 million for the financial year ending June 30.

Global volatility, increased utility costs, possible increase in unemployment numbers, dampening housing market and weak equity markets, are contributing towards the retailer’s cautious stance.

However, Harvey stated its franchise outlets experienced a strong increase in customer transactions even though revenue was down, mainly due to the Australian dollar reducing prices on imported goods. The result before tax on the retail franchising operations segment was $254.59 million, a reduction of 18 per cent compared to the previous year's $310.68 million.

"The strength of the Australian dollar, price deflation and intense competition has eroded average selling prices, and ultimately retail gross profit margins," the retailer stated. "We will be looking to investment in the ongoing development of our robust franchise system and will continue to support our franchisees where necessary to effectively manage changing retail trends and varying consumer habits."

Total revenue from continuing operations was $2.70 billion, up from $2.45 billion at the same time last year.

It managed to maintain strong growth throughout many key categories including technology products such as smartphones and smart TVs.

Conversion of Rick Hart and Clive Peeters stores to Harvey Norman and Joyce Mayne should result in an overall benefit to the consolidated entity. In August Harvey announced its intentions to restructure Clive Peeters and Rick Hart businesses, closing seven outlets and converting 16 stores to the Harvey Norman and Joyce Mayne brand.

The most significant addition for the first half of 2012 financial year will be the launch of its e-commerce site in October 2011. It will also be pioneering a software-on-demand multi-channel offer as an extension to its photo-finishing business.

“We are confident our online transactional strategy will produce incremental dollars to the existing channel,” Harvey Norman chairman, Gerry Harvey, said in a statement to the ASX.

The retailer is also on track to opening a 72,000sqm homemaker centre in Springvale, Victoria in October. It is being touted as the largest homemaker centre in Australia, anchored by Harvey Norman and IKEA.

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