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Cost-of-living pressures such as higher rent, utilities bills and groceries have curtailed household spending, with Australians shopping more carefully and switching to more affordable alternatives.
“There’s a bit of price sensitivity, they would like to buy the $3000 fridge, but they buy the $1500 one instead,” Harvey said. However, he said his company was oriented towards older, wealthier Australians who are financially secure and have likely paid off their mortgages. “We play to that.”
‘The next year will probably be one of the more interesting years in all our lifetimes.’
Harvey Norman’s Gerry Harvey
The retail veteran expects economic conditions to improve in the latter half of the year, with interest rates steadying, unemployment staying at moderate levels, inflation easing and consumer sentiment improving.
Looking at his company’s product mix, Harvey said there weren’t any standout performers, with categories such as TVs and lounges generating satisfactory sales.
“It’s not like you’ve got lots of hot products, but that may change in the next year,” he said. “The next year will probably be one of the more interesting years in all our lifetimes.”
Harvey Norman has declared a fully franked interim dividend of 10 cents per share, payable on May 1. Despite the decline in sales, investors cheered the update, sending the share price up nearly 4 per cent in afternoon trading as analysts noted the figures exceeded market expectations.
Harvey Norman sales and profits declined as consumers curtail their spending.Credit: Josh Robenstone
Documents filed with the ASX also signalled the business is investing in improving its digital and online offerings. During last year’s Black Friday sales, Harvey Norman’s website crashed and lagged between 8am to 8pm, unable to keep up with high online traffic.
However, Harvey said only a small fraction of its sales were online (6 per cent in fridges, 15 per cent in computers), with many internet purchases made after the customer had come into a store to see the product in person. The company has invested several millions into upgrading its physical showrooms, in contrast to ecommerce-only retailers Temple & Webster and Kogan.com.
Harvey dismissed the business-model of online-only shops such as Temple & Webster, which have found it hard to keep the momentum they had early in the pandemic, when a lockdown-driven shopping boom boosted their profits.
Temple & Webster.Credit: Peter Braig
Temple and Webster posted $13.9 million in net profits in the 2020 financial year, but earnings have steadily declined since then to $8.3 million in fiscal 2023 (although it recently revealed a record half in which revenue shot up 23 per cent).
Kogan.com has been unprofitable for the past two financial years, booking a $25.9 million net loss in fiscal 2023, but has changed its business strategy after reducing excess inventory built up during the pandemic.
