Retravision renegades improve outlook for Harvey Norman

By James Wells

SYDNEY: A leading retail analyst has lifted projected revenue assumptions for Harvey Norman through to the 2009 financial year after predicting it will absorb approximately 20 Retravision NSW stores in this period of rapid industry consolidation.

In a statement to clients today, Credit Suisse retail sector analyst, Andrew McLennan said the fallout from the disintegration of Betta Stores Limited and Retravision NSW is likely to benefit Harvey Norman.

“Our recent industry feedback indicates the electrical retail sector is entering a period of accelerating industry consolidation,” McLennan said in his statement.

“This development is due to the financial difficulties experienced this calendar year by Retravision NSW and Betta, which are expected to drive a tighter credit environment and reduced supplier support for these groups.

“Acceleration in the rate of their market share loss is likely as a result. The combined market share of these two groups is around 18 per cent of the consumer electrical sector. We believe [Harvey Norman] is likely to pick up around 20 regional Retravision stores and should improve like-for-like sales growth from FY08 as volume migration accelerates from small stores to the large store operators.

“We have accordingly lifted our revenue assumptions by 2.4 per cent in FY08 and 3.1 per cent in FY09, while retaining our FY07 forecast. We are also raising our [Harvey Norman] franchising margin forecasts. Our 12-month target price has been raised from $4.40 to $4.70.”

Over 1.4 million Harvey Norman shares were traded today with the stock reaching $4.02 by 4.00pm this afternoon.

This week, Harvey Norman announced it has opened its first two former Retravision NSW stores which have been re-branded Joyce Mayne at Wallsend and Dubbo.

Retravision NSW stores located at Newcastle West and Cobar have already re-branded their stores as Harvey Norman, while Retravision stores at Bennetts Green, Muswellbrook and Port Stephens are believed to be in the process of making the switch.

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