Offshore boost for Harvey Norman sales

Harvey Norman has lifted full-year profit by 7.2 percent to $402.3 million with its overseas ventures again outshining local franchisees, which struggled amid tough retail conditions.

The homeware, whitegoods and electronics retailer lifted total sales by 12.1 percent to $2.23 billion in the 12 months to June 30, largely thanks to its 90 company-operated offshore stores breaking through the $2 billion sales barrier for the first time.

An 11.7 percent rise in Harvey Norman’s overseas profitability to $129.70 million – including a 9.7 percent lift in offshore revenue to $2.05 billion – offset a 2.3 percent decline in revenue received from the company’s 195 franchised Australian complexes.

Revenue from local franchisees was $944 million for the year, with total franchisee sales down by 1.8 percent to $5.66 billion amid a housing market downturn and broader economic jitters.

Harvey Norman announced a $173.49 million capital raising to manage debt, but still increased its final dividend by 3.0 cents to a fully franked 21.0 cents.

Shares in the company dropped by 1.82 percent to $4.585 by 1223 AEST, still 25 percent higher than $3.66 a year ago.

Harvey Norman said it had been a particularly tough second half in Australia, with fourth-quarter aggregate comparable sales for franchisees dropping by 1.6 percent, for a full-year comparable sales decline of 0.9 percent.

The company said local franchisees had nonetheless continued to invest in their operations in anticipation of federal government tax cuts, stabilizing house prices and an increase in lending by banks for mortgages and small business loans.

Chairman Gerry Harvey said the company has begun replicating its successful overseas premium store format in Australia and New Zealand.

A premium refit is currently underway at the company’s Cairns franchised complex, while franchised complexes at Campbelltown, Balgowlah, Preston, and Aspley will commence post-Christmas.

The company said it intends to grow its international footprint with up to 21 new stores overseas within the next two years, including 17 alone in Singapore and Malaysia.

“We intend to grow our international retail footprint and are on track with our expansion opportunities,” Mr Harvey said on Friday.

Harvey Norman’s Singapore and Malaysia segment increased profit by 48.1 percent to $37.1 million for the year, while profit in Slovenia and Croatia ticked 0.8 percent higher to $7.46 million.

In Ireland and Northern Ireland, profit nearly quadrupled to $6.39 million on double-digit growth across all key product categories.

Challenging economic conditions weighed on the company’s New Zealand stores, with profit from across the ditch dropping by 6.0 percent to $77.39 million despite sales revenue increasing by $25.57 million.

Overseas revenue has now increased by 48 percent over the last five years and profitability has nearly quadrupled.