The Harvey Norman Holdings Limited (ASX: HVN) share price is up more than 3% after the company gave a trading update and revealed a share buyback.
Harvey Norman runs a franchise model in Australia and operates company-operated stores other countries.
Harvey Norman Holdings share price
Trading update
The business said that aggregated sales revenue from New Zealand, Slovenia, Croatia, Ireland and Northern Ireland, as well as majority-owned controlled company-operated stores in Singapore and Malaysia, and from independent Harvey Norman, Domayne, and Joyce Mayne franchised complexes in Australia decreased by 9.1% for the period 1 July 2023 to 30 September 2023, compared to the prior corresponding period.
As a reminder, sales made by franchisees in Australia are not made by Harvey Norman Holdings Limited or its controlled entities and do not form part of the financial results that the ASX share reports.
The company benefited from an appreciation in a number of currencies, such as a 12.8% rise for the Euro, a 12.4% rise of the UK pound, a 2.9% rise of the New Zealand dollar, an 8.1% appreciation of the Singaporean dollar and a 1.1% appreciation of the Malaysian Ringgit.
Breakdown
I’m sure readers would like to know how the different markets performed in the FY24 first quarter, in Australian dollar terms.
Australian franchisees saw sales a decline of 13.6% year on year.
New Zealand sales fell 1.6%.
Slovenia and Croatia sales rose by 1.9%.
Ireland sales increased by 13.7%.
Northern Ireland sales rose by 2.3%.
Singapore sales increased by 6.9%.
Malaysian sales were flat, though comparable sales showed a decline of 8.4%. During the period, it opened three new company-operated stores in Malaysia, bringing its total number of stores in the country to 31.
Profit hit
Harvey Norman revealed that its profit before tax and non-controlling interests for the quarterly period, excluding AAS16 leases and net profit valuations, sank 49.1% to $86.23 million.
The company noted that this disclosure is not intended to be earnings guidance.
Share buyback
Harvey Norman revealed that it intends to do an on-market share buyback of up to 10% of its shares on issue. This would be close to $442 million based on the closing Harvey Norman share price on 26 October 2023.
The board thinks this is “appropriate capital management” given the recent share price performance. But, it will retain financial flexibility so it can execute on its strategy.
Final thoughts on the Harvey Norman share price
The Harvey Norman share price is down close to 20% from January 2023. It’s better value than it was, but profit has slumped and sales are dropping.
I do think retailers can be opportunities during downturns, but Harvey Norman isn’t the first one I’d go for.
