HVN Harvey Norman

[winner69]

Poor Gerry had a hard couple of years but you have to admire his attitude ......but Percy would say he's past it eh

From the SMH today -

HARVEY Norman has joined the throng of retailers this year to plaster its financial presentations with the term ''omni-channel'' in the hope of looking internet savvy. But to founder and chairman Gerry Harvey, it is ''spin and bull****''.

Amid the worst conditions the retail veteran has seen in more than 25 years, Mr Harvey said yesterday the business was only booking about $50,000 to $60,000 a day in online sales, despite the hype about internet shopping.
But he felt pressure to invest in Harvey Norman's omni-channel platform and spruik the company's achievements in developing its online capabilities, lest he be labelled a ''dinosaur''.

''You have to have it, the problem is that as a public company you have got to give the spin, so every company is out there giving the spin and we do the same thing,'' Mr Harvey told BusinessDay yesterday as the company posted a 31.6 per cent drop in full-year net profit to $172.47 million.


''You devote all this time to your omni-channel and integrated … and you go on with all this bull**** and the result is that it is 1 per cent of your sales. But if you don't go on with the bull**** you are out of fashion, you are not with-it.''
Mr Harvey said retailers were almost forced to come out with spin to plump up their online strategies to the market.

''I am reluctant to do it but I do it, because if I don't they label me a dinosaur. I'm out there labelled as a bloody dinosaur.''

Indeed, Harvey Norman's investor presentation accompanying its 2011-12 full-year results led with the company's online strategy - spin and all.
''Our omni-channel strategy is the backbone of the business,'' the presentation proudly proclaimed, ''and we have made strong progress throughout the year.''

Leading retailers this year have filled hours of presentations and felled forests of trees to produce documents laying out their omni-channel strategies, keen to pick up on consumer enthusiasm for shopping online. ''And everyone does it,'' Mr Harvey said, ''but then when you check with Myer or David Jones, whoever, JB Hi-Fi, Good Guys, it's nothing of their sales, somewhere between half and 1½ per cent. I get out there and tell it like it is, but I get bloody castigated and pilloried.''
He said many of his outlets did hardly any business, or none, online, however customers did do price and product research online.

''A lot of them [Harvey Norman franchisees] say people do research online and so the number of people that are researching our product online has jumped 25 per cent, but our sales haven't jumped at all.''

In fiscal 2012 Harvey Norman's revenue fell 7 per cent to $5.74 billion. There was a 6.5 per cent drop in comparable store sales.

Harvey Norman's margins and earnings continued to be crunched by the weight of price deflation, especially in TVs and electricals, poor consumer sentiment and a flood of cut-price product flooding the market due to recent business collapses.

The company declared a final dividend of 4¢ per share, down from 6¢ for the same time last year.


Read more: http://www.smh.com.au/business/harvey-puts-brakes-on-spin-20120831-255uu.html#ixzz25BkxOmVa

[percy]

Not much for Gerry to look forward to.
Appliance retailing is not going to get any easier.
No way can you get overheads down to match price deflation.
Interesting to note customer's using internet to check out prices,so they are more savy when they come into the stores.
No surprises there.!!
Life changes.As a boy I had a holiday job putting lawn mowers together.When a customer brought one,we started it up and customer would test drive it.This does this and that does that.!
Well last sunday guy in front of me at Bunnings had a new motor mower on his cart.All in an unopened box.I thought to myself,no start up,no test drive.!! Next he will be buying it on line from the manufacturer in China.!!!!

[winner69]

Wondered about 'experiences' a few months ago when I bought a new line trimmer .....a decent 2 stroke job that could get through the heavy stuff

Went to a chain saw / mower specialist .....picked or got talked into what I needed ...got taken out the back and shown how to start the thing efficiently ....showed me how to take the head off to put a new line in ....and threw in a litre of he special oil that 'works best' with this machine


Thought no way the part timers at bunnings and mitre 10 would do that .....even if they even knew the ins or outs of a line trimmer. Paid more than whatever bunnings etc had but I know I got something decent that'll work for 20 years like the old one

Can't imagine buying on line though

Good to see observant you are Percy ...the best way to pick up trends eh ESP if you think about what it means

[percy]

Good experience with the trimmer.A lot of specialist "old fashioned" retailers who give great personnel service continue to do well.I know this is true in the book trade.Good book retailer knows what their customer enjoys.
Yet,[sorry] camera retailers,give good advice,but don't make the sale.Month later customer comes in and asks how this and that works?.BROUGHT ON LINE.Bet you would answer the same as me "I don't know".
On line sales were growing [last figures I heard] at 15% compared with shop sales of 3%.
On line means customer can do research before entering a shop.
As were find with shares ,you can get all the information on line.

[winner69]

MAybe Gerry needs to visit a Marks and Spencers .... recognising both the internet and how to use technology in store


http://www.guardian.co.uk/business/2012/sep/02/marks-and-spencer-multichannel-shopping

[percy]

I think the article "Who will sack Gerry Harry?" in the www.smh.com.au was really written by KW.!!!!

[macduffy]

HVN interim profit down 36%. Weaker sales, property writedowns.

http://news.theage.com.au/breaking-news-business/profit-slumps-at-harvey-norman-20130228-2f7o3.html

[winner69]

And the share price roars ahead .....at prices not seen since mid 2011

[winner69]

35% up since August not too bad ...retail the sector

[percy]

Obviously they didn't read the Westfield report, which stated that sales are down in Australia, and not looking like improving. Reduced spending is the new normal. Some people are still in denial. Still, good to see I was right in that the next wave of the retail restructure is the retail property market.

Meantime, more and more international companies have started shipping to Australia. Latest addition to the mix is Next from the UK who offers free shipping to Australia - very cheap, very fashionable clothing for men, women and kids. That will put the cat among the pidgeons for the fashion retailers!

PS. Next also offers $5 shipping to NZ, check out nextdirect.com :-)

I find it frightening most retail stocks in NZ are doing so well.Scares me the the rising tide is floating a lot of rusty old buckets.

[winner69]

Even Masters offers online sales to NZ ....maybe just to piss Bunnings off .....but not free shipping so that kills it

[winner69]

I find it frightening most retail stocks in NZ are doing so well.Scares me the the rising tide is floating a lot of rusty old buckets.

For the last few years NZers have been consistently spending more in retail shops .... retail sales are trending up quite strongly

Mind you margins might be a bit lower .... but in any resessionary period the weak (and the less relevant) die away and the strong get stronger .... maybe it is only the shareprices of the strong that frighten you .... postie excluded

[percy]

You need to check what constitutes "retail" - here in Australia it includes food (supermarkets) and liquor, cafe/restaurants/takeaways and other goods like pharmacy. So while total retail sales might be increasing with inflation and population growth, spending on discretionary items like clothing and household appliances is still falling. Increased supermarket spending on bananas and booze is not the same as increased spending on clothing and footwear.

http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/8501.0Main%20Features3Dec%202012?opendocument&tabname=Summary&prodno=8501.0&issue=Dec%202012&num=&view=

Thanks for posting that link.Confirms what I thought.

[h2so4]

There is a couple of retailers I like TRS and JBH. Go and stand in their shops for a couple of minutes and you'll get the general idea.

[winner69]

Same classifications used in NZ as Aust KW et al

So that chart does include food liquor .... everything

By sector a bit mixed but over the last year with some up and some down but healthy growth has been seen in the Department Stores (Warehouse, Briscoes etc) Furniture, and Hardware sector

Ghings are picking up and there is more discretionary spend happening .... so be ahead of the game ... good retail stocks are the thing

KW and sulpher man ..... you should know by now NZ leads the world as far as economic indicators go and leads Australia in particular (after all we are the first country to see the shn each day) .... NZ went down and Aust now following .... NZ is experiencing pretty strong growth at the moment ..... your turn will come when you get rid of that Julia

[percy]

Same classifications used in NZ as Aust KW et al

So that chart does include food liquor .... everything

By sector a bit mixed but over the last year with some up and some down but healthy growth has been seen in the Department Stores (Warehouse, Briscoes etc) Furniture, and Hardware sector

Ghings are picking up and there is more discretionary spend happening .... so be ahead of the game ... good retail stocks are the thing

KW and sulpher man ..... you should know by now NZ leads the world as far as economic indicators go and leads Australia in particular (after all we are the first country to see the shn each day) .... NZ went down and Aust now following .... NZ is experiencing pretty strong growth at the moment ..... your turn will come when you get rid of that Julia

I walked through Northlands Mall on Tuesday morning.Dead,more staff than customers in general retail stores,including Pumpkin Patch.

[winner69]

I walked through Northlands Mall on Tuesday morning.Dead,more staff than customers in general retail stores,including Pumpkin Patch.

Not exactly the C-suite or a direct line to John like sparky but passing through Carterton the other day couldn't resist going into the wrightsons store

Heck chocker block with stuff for the farm and piles of dog and cat food which was on special.

2 guys in the store about 11ish ....busy today I asked ....nay not a customer all day .....maybe farmers don't go to town on Thursdays anymore ....or maybe the paddocks are to dry and no money to spend

[percy]

Not exactly the C-suite or a direct line to John like sparky but passing through Carterton the other day couldn't resist going into the wrightsons store

Heck chocker block with stuff for the farm and piles of dog and cat food which was on special.

2 guys in the store about 11ish ....busy today I asked ....nay not a customer all day .....maybe farmers don't go to town on Thursdays anymore ....or maybe the paddocks are to dry and no money to spend

No surprises there.Savy farmers will order from PGW rep who calls on them regulary.

[winner69]

No surprises there.Savy farmers will order from PGW rep who calls on them regulary.

did say quite a few orders get phoned or email in ,,,, but none last thursdy night

[percy]

did say quite a few orders get phoned or email in ,,,, but none last thursdy night

Bit surprised PGW don't have an online store.

[percy]

My last contract job was to design an internet business that will be the final nail in HVN coffin's. Cant say who it was for, but its one of Australia's biggest retailers, and its going to kick ass! Lucky for you guys, second phase of the roll out will be NZ :-)

The internet conquers all - physical retail is SO LAST CENTURY!

Did you know that the #1 Internet retailer in the US is Williams & Sonoma, a $3.5 billion company with 560 stores, yet does over 40% of total revenue online. They are busy shutting up retail stores, and relying more and more on online, while expanding internationally. This is how you do retail in the 21st century!

Now that's what I call really interesting.!!!

[winner69]

Now that's what I call really interesting.!!!

Prob kw was doing it for postie plus eh percy

[percy]

Prob kw was doing it for postie plus eh percy

Yeah Right.!!! Made my day>!!!

[steve fleming]

Interesting move announced yesterday by HVN into high rise mixed use development.

Developing a $150m apartment complex above its North Ryde site, with more apartments planned for Perth and Crows Nest.

Potential to unlock some big value in their under performing bulky goods site, with some decent uplifts possible as they take advantage of re-zoning.

Gerry has always fancied himself as a developer, but this smacks a bit of a desperate attempt to add a bit of sexy growth to the HVN story (although they reported some pretty good numbers today).

[winner69]

Why Harvey Norman has run out of steam

DateJanuary 24, 2014 - 2:47PM 5

Nathan Bell

Hold your stones. What I’m about to write may sound like value investing heresy. I’m about to recommend you sell Harvey Norman – largely because it has a strong balance sheet and an owner manager.

We typically love these characteristics. They help companies maintain a long-term perspective, providing shelter to ride out short-term storms. But when a storm turns out to be a tsunami, then shelter may not do you much good; it would be better if you were a little less comfortable and were forced to seek higher ground.

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The internet has unleashed a tsunami on the retail industry and it won’t work to bunker down and wait for it to pass. Unfortunately, for the retailers – though perhaps fortunately for shoppers – there don’t appear to be any easy answers. But with Harvey Norman owning a large slab of its properties and having a husband and wife team as chairman and chief executive, owning over 30 per cent of the shares, it doesn’t appear to be asking the tough questions.

But before expanding on why we think Harvey Norman’s best days are behind it, let’s give credit where it’s due.

Gerry Harvey is clearly a smart bloke. The stack ‘em high sell ‘em cheap model integrated with direct property ownership and franchising has been extremely successful. It’s a business model that, until recently, has served everyone – customers, suppliers and shareholders – very well. Fortunes have been made.

New model needed

That model, though, appears to have had its day. According to a recent study by Fleishman-Hillard, 97 per cent of shoppers research purchases online and trust recommendations from the internet over family and friends. The internet is the tool for research pre-purchase and increasingly the point of sale.

The effect is twofold. Salespeople in bricks and mortar stores have a diminishing role to play; while more transparent pricing makes their job doubly hard.

The online retail model has also lowered operating costs. Renting a warehouse near a freeway and selling through a website is far less expensive than renting space in hundreds of shopping centres, fitting them out, filling them with stock and staffing them with friendly salespeople.

The internet has enabled a better business model. We can more easily buy things we want, when we want them, for a lower price.

Electronics and computer sales are among the hardest hit – because there’s little a shop worker can add to what’s said about them online – and they account for around 40 per cent of Harvey Norman’s sales.

Even categories less exposed to the online threat – such as furniture, bedding and white goods (which comprise 50 per cent of Harvey’s sales) – are being threatened by global operators such as IKEA and new chains such as Woolworths’ Masters. Even JB Hi-Fi has expanded into white goods and home appliances.

Retail has always been and will always be competitive. But it’s getting tougher, and it’s hard to see Harvey Norman maintaining its market share in such an environment.

These structural threats say nothing of cyclical ones such as housing starts and unemployment. Australia has enjoyed a huge, once in a generation, resources boom. This has boosted employment and incomes across the land, helping us buy new houses and fill them with shiny TVs and plush couches.

But the boom is busting and, despite the likelihood of a short-term uptick in retailers’ performance this Christmas thanks to record low interest rates and the resultant frothy housing market, we can’t see the next decade being anywhere near as favourable for retailers as the last.

Where’s Harvey to go?

So Harvey Norman’s valuation needs to be considered against this gloomy backdrop.

The company can be thought of as three interrelated businesses – its 77 company owned stores, its 206 franchised stores and its $2.2 billion property portfolio. Let’s start by estimating the value of the property.

Harvey Norman owns 102 of the 283 sites it operates (under its various brands: Harvey Norman, Joyce Mayne, Domayne, and Space), primarily the non-shopping centre based sites in Australia and New Zealand. These properties are mostly tenanted by Harvey Norman franchisees.

The portfolio has a balance sheet value of $2.2 billion, based on market valuations. Based on our broader views about property valuations in this country, we’d consider this to be on the generous side. We’d estimate fair value for the portfolio to be closer to $2 billion, and a cheap valuation of $1.5bn.

So what about the remaining retailing business? Harvey Norman will likely see some respite in the current half thanks to a better-than-expected Christmas period, but the longer-term trend is unlikely to reverse.

We estimate that rent-adjusted earning before interest and tax (EBIT) could swing between $100 million and $300 million over the next few years depending on the economic environment. All things being equal we’d be willing to pay a higher multiple when EBIT is closer to $100 million and a lower one when it’s closer to $300 million. All in all, we’d suggest a value of between $1 billion and $1.5 billion for the retailing business.

Adding on the property value of between $1.5 billion to $2 billion and deducting net debt of $659 million we arrive at an equity value of $1.8 billion – $2.8 billion, or $1.73–$2.67 per share. That’s well below the current market price of $3.26. Or, to put it another way, the current market price assumes retailing profits will rebound and be sustainable. We have our doubts.

Fightback?

Hold up though. Doesn’t Harvey Norman have one of the best retailing brands in the country and the balance sheet strength to fight back?

Yes and no. As we’ve already explained, the property portfolio that underwrites the company’s value, and protects shareholders from a catastrophe also allows it to be lazy. A highly indebted retailer would have to adapt or die. Harvey Norman can afford to move more slowly.

The property portfolio and the relationship with the franchisees also means it’s hard for it to adjust its business model. If Harvey Norman decided it needed fewer stores, for example, to whom would it sell them? And for what use?

The balance sheet strength also gives it the firepower for a costly and value destructive price war.

Repositioning the business for success will be tough. Although we’re impressed with management’s recent refocusing on service, over price, and development of a decent online store, it’s probably a case of too little too late.

We also fear that the man who built the empire – Gerry Harvey – may not be the right person to recast it. With more of his time being spent on the racecourse, he’s not as hungry for success as he used to be.

It all adds up to an unusual problem for shareholders. Harvey Norman’s apparent strengths – its property portfolio and long-term owner manager – are part of the problem not the solution. And neither is likely to be going anywhere anytime soon.

This article contains general investment advice only (under AFSL 282288).

Nathan Bell is Research Director of Intelligent Investor Share Advisor . You can unlock all of Share Advisor's stock research and buy recommendations by taking out a 15-day free membership.


Read more: http://www.smh.com.au/money/investing/why-harvey-norman-has-run-out-of-steam-20140124-31db5.html#ixzz2rIaZjSXz

[percy]

Be fun trying to rent out ex Harvey Normans stores after the operators have gone belly up.
May have to take a haircut on the rental,which would affect the value of the building.
Ratchet clauses may become a thing of the past.?
A lot of empty retail space out there.!

[steve fleming]

SUL - Sales up 6 % but margin pressures = massive downgrade
TRS - sales up 18 % but massive margin pressures = massive downgrade (35% below consensus)

So, while analysts got the sales line right (in line with reported spending trends) the competitiveness of the retailing space has been completely underestimated

the retail boom amongst the listed retailers is a bit of an illusion

[percy]

Would some kind sharetrader, please post the link to the wonderful article I have just read in The Age,headed "Harvey Norman named World's top short sell".
Confirms our thoughts.!

[Okebw]

As requested

http://www.theage.com.au/business/markets/harvey-norman-named-worlds-top-short-sell-20141014-115bzr.html

[percy]

As requested

http://www.theage.com.au/business/markets/harvey-norman-named-worlds-top-short-sell-20141014-115bzr.html

Thank you.

[Okebw]

I was actually reading another article at the same time and it happened to be linked at the bottom of the page