Furniture Retailer Bullish about Aust Economy 1

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Monday, February 29th, 2016
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Retailing billionaire Gerry Harvey is banking on Australia’s strong housing market to continue growing after Harvey Norman’s first half net profit jumped by more than 30 per cent.

Mr Harvey says housing construction and population growth will continue to fuel Harvey Norman’s sales growth.

Moody’s Analytics predicted on Thursday housing growth will slow over 2016 and 2017, but not slump.

Wages are growing at their slowest pace on record and unemployment ticked up to six per cent in January.

But the 76-year-old said prophets of doom are misguided and he sees no reason to ignore the economy’s resilience.

“You’ve just seen an economy that was very strong have a resources boom that came to an abrupt holt. Prices crashed and this economy has survived that,” he told AAP.

“You’ve got an interest rate that’s at its lowest in 50 years, unemployment low by standards of the last 50 years – all the indicators are that the economy is very strong.”

Harvey Norman’s net profit in the half year to December 31 was $185.5 million, while franchisee sales revenue increased 7.7 per cent to $2.72 billion.

A day after rival electronics retailer Dick Smith confirmed its demise, Mr Harvey sees it as a boost for Harvey Norman.

“If a competitor’s doing $1 billion in sales in Australia, obviously all the other people in that category are advantaged by it,” he said.

“It’s no different to when Masters go, there’s certain things that they sell that we sell, so we’ll be advantaged when a competitor is out of the market.”

After Dick Smith’s announcement, the company’s eponymous founder – who sold the business in 1982 – sounded a warning for Mr Harvey.

“If Gerry Harvey’s not careful, he’s going to be next,” Dick Smith told NewsCorp Australia.

“I just reckon there’s no money in consumer electronics – that’s why I sold out 30 years ago. And Gerry should realise that quickly.”

Mr Harvey insisted Mr Smith was a close mate and a “great Australian”, but said he probably made the comments before he saw Harvey Norman’s results.

“I’ll invite him out to have a look at our figures,” Mr Harvey said.

Electronics have been key in driving global sales up eight per cent higher, Mr Harvey said.

“With the latest things happening with phones, tablets and computers out there the product is good,” he said.

“The prices are so good people are spending in that category rather than other categories.”

He believes the strong numbers send a message to his critics.

“They can’t write me off. If anyone is out there criticising me after today you’ve got to say `what’s their angle?’,” he said.

HARVEY NORMAN PROFIT SPIKES

  • Net profit up 31pct to $185.5m
  • Global sales revenue up 8pct to $3.33b
  • Fully franked interim dividend 13 cents, up four cents
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  1. Tom Mathers

    Whilst it is true that Harvey Norman will no doubt benefit from the fall of Dick Smith (and it is also true that Gerry Harvey is extremely well respected) Harvey's comments about the economy seem optimistic given that most economic forecasters expect the economy to grow at 3 percent or less over the near term future. Moreover, almost everybody is expecting the market for new housing to slow (albeit remain reasonably strong), so this driver of furniture sales will wane to some extent.

    On possible positive, however, revolves around expectations of a likely pickup in renovations activity as many homes reach the 10 to 20 year age in which remodelling typically takes place. Presumably, as people renovate, they may choose new furniture and as well as new consumer goods to go with their remodelled home. This may provide some uplift to furniture retailers notwithstanding the anticipated pull back in new housing investment.