Further retail decline inevitable: Harvey
Gerry Harvey says there's no end in sight for Australia's economic jitters, but the retail veteran says he can cop a further sales slide so long as Harvey Norman's competitors feel it worse.
The 80-year-old chairman said he expected tough economic conditions to continue to dent local sales, which declined by 0.9 per cent on a comparable basis over the year, including a dire 1.6 per cent comparable decline in the fourth quarter.
Offshore stores again did the heavy lifting in Harvey Norman's full-year result released Friday, with the company's international segment responsible for a 7.2 per cent profit increase to $402.3 million for the 12 months to June 30.
Total sales increased by 12.1 per cent to $2.23 billion as profitability rose 11.7 per cent at the 90 company-operated stores in Asia and Europe, which broke through the $2 billion sales barrier for the first time.
Mr Harvey said a weak economy was to blame for the chain's Australian franchisees recording a 1.8 per cent sales decline to $5.66 billion, and said a housing market downturn and broader economic stagnation had sapped confidence from the sector.
Mr Harvey also said it was clear the country was headed for further economic strife over the next six months.
"I don't think (the downturn) will be over soon ... I think (Australia) is very lucky we've done as well as we have done," Mr Harvey told AAP.
"We're looking at interest rates going down to near zero ... unemployment remains low but growth is not at what the Reserve Bank wants ... yes it will hurt us, but my ambition is not to hurt as much as the next bloke."
Mr Harvey said the game was to outlast rivals though savvy debt management and strong asset backing as an "inevitable" recession approaches.
Debt reduction was the key reason for Friday's $173.49 million capital raising announcement, while the company's property portfolio rose in value to just under $3 billion during the year to represent 93 per cent of Harvey Norman's total asset base.
"With debt... you want to avoid being in that bottom 10 or 15 per cent (of companies) ... who will go broke in a recession," Mr Harvey said.
"You want to be prepared for the recession that will come ... Will it be next year or 30 years? I don't know, so we've got to prepare."
Nonetheless, Harvey Norman increased its final dividend by 3.0 cents to a fully franked 21.0 cents.
Shares in the company dropped by 3.85 per cent to $4.495 by 1406 AEST, but they were still 22 per cent higher than $3.66 a year ago.
The homewares and electronics company offered no concrete guidance going forward, with Mr Harvey only saying that local comparable sales had picked up by 3.0 per cent in July and August.
"We're not doing too bad, we're moving along - but all the experts in the world are trying to grow the economy, get GDP growth - and no-one can figure out how to do it," he said.
Despite the soft conditions, the company said local franchisees had continued to invest in their operations in anticipation of federal government tax cuts, stabilising house prices and an increase in lending by banks for mortgages and small business loans.
M Harvey said the company had also begun replicating its successful overseas premium store format in Australia and New Zealand.
The company said it intend to grow its international footprint with up to 21 new stores overseas within the next two years years, including 17 alone in Singapore and Malaysia.
HARVEY NORMAN LIFTS FY PROFIT
* Net profit up 7.2pct to $402.3m
* Sales to customers up 12.1pct to $2.23b
* Fully franked final dividend up 3.0 cents to 21.0 cents
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