Harvey Norman looks to heavens
GERRY Harvey is banking on a little divine intervention to keep shoppers flooding into his stores.
The co-founder and chairman of Harvey Norman is confident the heavens will deliver, as signs emerge that consumer confidence is on the rise in 2013.
The retailer reported a 4.1 per cent jump in overall sales across Australia in January, with global sales up 3.8 per cent.
This followed six months of weak sales and falling property values, which drove the company's net profit down 36.5 per cent to $81.9 million in the half to December 31.
Despite the fall, Harvey Norman shares rose 21¢, or 9.21 per cent, to $2.49 on Thursday as the company was more upbeat about its outlook.
Asked what he planned to do to sustain the bumper sales numbers, Mr Harvey said: "Pray. It might have more effect than anything else."
Excluding the effect of new stores and store closures, Harvey Norman's sales in the period dropped by 5.3 per cent.
Mr Harvey could not pinpoint why there had been such a turnaround in overall sales, but said he was encouraged by the renewed positivity.
"Consumer confidence levels have risen recently and, because of that, you've now got weekly sales in January and February exceeding last year," Mr Harvey said.
"For the first time we've got sale increases for such a long time. It's encouraging that you've just gone [up] two months in a row."
Less encouraging was Harvey Norman's electronics and technology categories, which the company said were "challenged" by deflationary headwinds that had affected margins.
Mr Harvey admitted the categories were causing problems but said he had no plans to get rid of them and focus solely on the retailer's homemaker products.
"We're persevering in turning them around. We're living in hope and confidence that that'll happen," he said.
Mr Harvey said the retailer was expecting online sales in its technology area to be 2 per cent of total sales this year, "but in the other areas it'll be next to nothing".
He said he expects margin pressures to ease as more retailers shut up shop due to tough trading conditions.
"You've had so many retailers go out of business in the last couple of years and there's probably more to go," he said.
Harvey Norman said it had no plans to sell any of its investment properties, despite their values falling by $31.5 million in the first half - mainly linked to three recent developments and a flooded store in Queensland.
The company closed nine stores and opened six new stores in the six months to December.
Harvey Norman declared a fully franked interim dividend of 4.5¢ per share, down from 5¢.
InvestSMART FORUM: Come and meet the team
We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free