The Harvey Norman Holdings Limited (ASX: HVN) share price is up 4% after the retailer reported a weaker profit in the HY24 result.
Harvey Norman has a large franchise retail business in Australia, and it also has a growing presence in a number of company-owned stores in Asia and Europe.
FY24 first-half highlights
Here are some of the main numbers from the first six months:
- Total system revenue dropped 7% to $4.64 billion
- EBITDA declined 31.8% to $473 million
- Profit before tax (PBT) sank 29.5% to $303.8 million
- Operating cashflow jumped 45.8% to $497.3 million
- Profit / earnings per share (EPS) fell 45% to $0.16
- Interim dividend per share of $0.10, down 23%
Gerry Harvey, the chair of Harvey Norman, said the company is experiencing challenging retail conditions and still managed to deliver a slight year on year increase of its net assets to $4.51 billion, with a $4.14 billion property portfolio.
Company-operated overseas retail stores made up 26.4% of total PBT, excluding net property revaluations. Overseas retail profitability declined by $23.4 million, or 23.5%, to $76.2 million. Harvey Norman explained overseas retail sales were impacted by “persistent macroeconomic headwinds in New Zealand that continue to dampen consumer and business confidence” as well as ongoing inflation pressures.
In Australia, the franchising operations segment PBT saw a decrease of $94.6 million, or 39.8%. Inflation has continued to hurt homemaker activity in Australia. Australian franchisee sales decreased by 9.7% to $3.16 billion.
Management commentary
Gerry Harvey said:
We are well-positioned to benefit from growth in the homemaker categories and an improvement in residential property activity. Our strong balance sheet and prudent financial management provides us with the capacity to access additional capital to adapt to evolving business needs.
We remain committed to our Malaysian expansion plan and it is still our intention to grow to 80 stores by the end of 2028.
We continue to source suitable locations overseas to strengthen our global footprint, and are excited by the expansion of the brand in the United Kingdom, with the opening of the Harvey Norman Merry Hill flagship store in England later this year.
Final thoughts on the Harvey Norman share price
The retail business has reported the profit decline that investors were expecting. But, it still seems to be doing quite well. Large dividends are still headed to shareholders, which is pleasing for investors.
The Harvey Norman share price has largely recovered from the 2022 decline, so I wouldn’t call it a great buy today. Next time investors are very worried about retail could be a time to buy in my opinion, but not today. I think there are other retailers and ASX dividend shares that could make better buys today.
