A year after Harvey Norman embarked on a failed attempt to revitalise the collapsed Clive Peeters chain, Gerry Harvey has confirmed the company is purchasing several Retravision stores in an attempt to squash competition as the consumer electronics market shrinks even further.
And while Harvey admits the $55 million Clive Peeters acquisition didn’t go so well, both he and retail experts suggest the Retravision purchases may perform better – as long as it doesn’t commit too much money.
“If you can pick these stores up without any real cost, then it’s an opportunistic play,” City Markets chief analyst Peter Esho said this morning.
“If he can make it work, then good luck to him, but it needs to be done without any sort of significant financial cost.”
Harvey confirmed to The Australian Financial Review the company has purchased the Retravision and Betta Electrical stores in Gunnedah, New South Wales, and he’s also speaking with another half dozen Retravision locations.
The Retravision Southern buying group collapsed in May.
The negotiations are curious. Two years ago, Harvey Norman bought Clive Peeters for $55 million, but since then many of those stores have closed. According to Harvey, “this is different”.
Esho says the strategy really depends on which stores are profitable. If Harvey Norman can pick and choose which locations to acquire, then it can possibly expand its footprint and get rid of some smaller competition without much trouble.
“So long as this is an exercise which doesn’t involve any sort of large investment, or balance sheet risk, then I think it shouldn’t necessarily be completely dismissed.
“They paid a price for Clive Peeters. But if they can increase their footprint with profitable stores, run by independent operators, then it may not be so much of a bad thing.”
Clive Peeters lost much of its value as the flat panel television market continued to suffer massive depreciation. Harvey says that price decline may have eased.
“The day we bought Clive Peeters, disaster came down upon us because Clive Peeters was loss-making and we had to turn it around. Because televisions and computers fell off the side of a hill, we couldn’t turn it around.”
Harvey says the company will introduce new categories such as cookware and other appliances.
“We look at categories like beds and heaters and make up the sales that we’ve lost – if we can do that, we sort of solve the problem,” he said.
He also says the stores can be improved by using the Harvey Norman brand, with store operators converted into franchisees.
“These areas may be profitable,” Esho says. “If that’s the case, then this can work.”
Harvey Norman certainly needs the boost. The company’s shares have dropped 24% in the past year, with sales also falling over 6% in the nine months to March.
The consumer electronics market has also been shaken by the announcement Woolworths is shrinking its Dick Smith chain, and will eventually look to sell the brand.
This article first appeared at SmartCompany.