Shares in consumer goods retailer Harvey Norman fell more than six per cent after the company reported worse than expected sales in an uncertain retail environment.
Harvey Norman said net profit after tax and non-controlling interests was $128.95 million for the six months to December 31, 2011, down 2.1 per cent from $131.67 million in the prior corresponding period.
However, like-for-like sales fell 6.3 per cent in the half. Analysts said like-for-like sales were worse than anticipated.
“This fall is much more dramatic than the market was expecting and is no doubt the catalyst for much of the selling at present,” OptionsXPress market analyst Ben Le Brun said.
“These sales figures are further evidence of the continued theme of the cautious or spend-thrift consumer in Australia and throughout the world.”
At 1206 AEDT Harvey Norman shares were 13 cents, or 6.02 per cent, lower at $2.03.
The fall in the company’s share price follows a 17 per cent rally in recent weeks.
In a statement, Harvey Norman said Australia’s discretionary retail sector had been marred by a “combination of unprecedented challenges”.
“The combination of intense competitive pressures and price deflation in certain key product categories, accentuated by the high Australian dollar, deteriorating economic confidence and a prudent consumer, has seen many retailers struggle to maintain margins in the fight for market share,” Harvey Norman said in a statement on Wednesday.
It said sales of televisions and computers would continue to be challenging in the six months ahead.
However, Harvey Norman chairman Gerry Harvey was upbeat about the company’s prospects in relation to other retailers.
He said the company had a property portfolio valued at $2.12 billion which provided strength and stability to its balance sheet.
“Property ownership offers a distinct advantage over our competitors as it provides us with a reliable income stream in an uncertain retail climate,” Mr Harvey said.
“Our diversified strategy of managing an integrated retail, franchise and property system has enabled us to mitigate some of these negative headwinds and allow us to build on an exceptionally strong net asset base to provide for future growth.”
The balance sheet remained strong through conservative fiscal management.
In its outlook statement, Harvey Norman said it was neither a company of physical stores nor just an online retailer.
Harvey Norman’s Australian franchising operations continued to enjoy strength from the furniture and bedding categories.
“We also continue to see positive growth in the home appliances category on the back of the growth in the home renovation market.”
City Index analyst Peter Esho said the company’s underlying structural issues hadn’t been resolved and gross profits had been affected by heavy discounting.
“Harvey Norman will continue to be at the mercy of a consumer that is conservative in their spending patterns and more receptive of shopping online,” Mr Esho said.
