Nobody else would get away with it. In the middle of a Harvey Norman-driven campaign to get GST imposed on online sales Gerry Harvey has volunteered that 'half his family" enjoyed shopping online. It’s a textbook gaffe: But for this brutally honest 74 year old billionaire, gaffes hardly matter… what really matters is convincing an increasingly sceptical market you still have the smarts to run an empire.
Harvey Norman’s share price is almost a quarter of what it was five years ago. The market value of the entire company is less than the valuation of its buildings, yet Gerry Harvey says those who believe the internet holds the answer for his empire are being duped.
Says Harvey: "Don’t waste my time suggesting I don’t ‘get’ the internet, I got it years ago. Here’s the thing – very little of what we sell goes online, people are not buying fridges and beds online… our problem is low growth… price deflation, that's where the problem is."
In liaison with his retired business partner, Ian Norman, and his wife (Harvey Norman MD Katie Page) chairman Harvey has an unassailable grip on Harvey Norman Ltd, controlling around 46 per cent of the stock. It's this complete control that gives Harvey the freedom to ignore the finer points of corporate governance, but it also means he can jettison even a semblance of corporate spin: "I don’t have a turnaround story for you, I’m not going to give you a line... I just don't have an answer for our problems just now," he says.
For comments like this, not to mention a shattered share price, most CEOs would be removed. But for those who might harbour mutinous notions that Gerry Harvey might soon grant executive responsibility to a non-family member, forget it: He has no plans whatever to exit the business.
But he does concede Harvey Norman is fighting on all fronts: Price deflation, weak consumer spending, a high Australian dollar, and the perception (right or wrong) that the internet is undermining retail have brought what was once the leader in local retail franchising to a very low ebb. Harvey Norman's most recent profit result showed a drop of 29 per cent.
Says Harvey: "I’m not saying the internet is not a growth area: I love companies such as Seek and CarSales …they are great companies but my challenge is to make my shops work. I’ve just toured a range of our stores and I can say honestly, there is nothing wrong with them, they just have to wait until things turn.”
Harvey suggests industry estimates that online retailing now represents up to 6 per cent of all retail sales in Australia are illusory: He suggests the majority of these sales are made up of utility bills... "Actually if it is as high as 1 per cent in most of our product lines I would be surprised."
Nonetheless it is in the technology space that Harvey sees the ultimate opportunity for a revival at Harvey Norman: "I don’t know what the next big thing is, but I do know that every few years a new tech product comes along – let’s say flat screen TVs – and they walk off the shelves, then you get the profit kicker…it’s coming, I’m just not prepared to mislead you and say I know what it will be”, he suggests.
Compounding the sense of gloom around the retailer, Harvey has refused to give guidance for the year ahead: "Anyone who pretends to know the future is a mug”, he says. He's also certain the Harvey Norman's property portfolio is undervalued in a time of renewal for local REITs.
So there you have it: No guidance, no immediate answers and no realistic prospect of a new management regime at a company which once upon a time beat all comers.
Has Gerry Harvey run out of ideas or has the protection of company ownership allowed him to tell the awful truth... that most 'offline' retailers simply have to wait it out and ride the next wave when it comes?
He may certainly be correct about over-estimating the impact of the Internet when it comes to bulky goods such as sofas or fridges. As for the wider questions facing the group, the only thing we know for sure is that Gerry Harvey will be ultimately responsible when the answers have become clear.