Harvey Norman sales boost reflects improved consumer sentiment, recovering retail sector

Retailer Harvey Norman’s sales have increased for the first time in 18 months, with outspoken chairman Gerry Harvey declaring the boost the end of some of the toughest trading conditions he’s experienced in decades of doing business.

The good news comes alongside similar results from retailers during this year’s reporting season, indicating the troubled retail sector may be fighting back.

Harvey Norman global sales for the first nine months of the year brought in $4.17 billion, a decrease of 5% compared to the $4.39 billion made from sales this time last year.

Like-for-like sales increased by 2% in the first three months of the year, in contrast to a 7.5% drop this time last year.

Partner at Bentleys and retail expert, David Gordon, told SmartCompany the March quarter sales growth at Harvey Norman reflects the overall retail consumer trend at the moment – increased confidence and spending.

“There is no real indication that Harvey Norman has a strategy to outperform the market, it’s just a reflection of current consumer trends.”

“This also reflects its reconfiguration of the store network – they are closing non-performing stores and some of its other stores into Harvey Norman stores. This reconfiguration of the network is providing them with a better store-based performance on which to build,” he says.

The results come alongside Gerry Harvey’s plans to invest in new property developments alongside existing stores. Retail experts have pointed to Harvey Norman’s retail assets as holding much of the company’s value.

The Australian Financial Review revealed Harvey Norman will build a 12-storey office tower above its Domayne store at Macquarie Park in Sydney, including a six-storey commercial building and a 27-storey hotel and apartment tower. This is expected to total $150 million.

But as Gordon points out, developing a property portfolio can be a risky move.

“The danger for a stock standard retailer is there becomes a concentration on the property side which detracts the corporate from the core retail business. The corporate can hide behind the property portfolio.

“I’m not saying that Harvey Norman will fall into this trap, but it’s something it needs to be conscious of. History is littered with examples of retailers failing because their focus is not on their core operating business,” he says

Harvey Norman’s global sales (excluding Singapore), which have been declining since 2011, posted a 0.6% rise compared to this time last year, and sales reached a total value of $1.28 billion for the March quarter.

SmartCompany contacted Harvey Norman, but the company was not available to comment prior to publication.

Gerry Harvey told The Age this is the first positive growth the company has seen for three years. He says in his 50 years of business he’s never experienced tougher conditions.

“Our sales have been going down, down, year after year,” he said.

But despite warning it’s too early to celebrate a strengthening sector. Harvey told AFR the decline in product prices in the consumer electronics and homewares sectors were stabilising.

“Everything we were selling practically was going down in price. I don’t think we have anything coming down in price anymore,” he was quoted as saying.

“So now for us to be up a little bit in the quarter means the rest of the business has picked up the slack,” he says.

 

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