By Chris Nicholls
SYDNEY: Gerry Harvey has categorically denied any large-scale plans to expand in Europe, despite speculation in a Sydney broadsheet, citing high rents as the core reason.
In an interview with Current.com.au, the Harvey Norman co-founder and executive chairman said while stores would continue to open, there was no plan to expand rapidly.
“The biggest problem you’ve got in Europe is the cost of the property and the rents, and that’s a big reason why they’ve (Dixons – Europe’s largest electrical retailer) got so many problems. The rent kills you.
“An electrical shop can pay one, two, three, four per cent of turnover for rent, it can’t pay five, six, seven, eight, nine, ten, fourteen, fifteen per cent.”
While he had commented to a Sydney broadsheet that one Dixons store could be paying up to 25 per cent of turnover in rent, he said this was based on his own estimates.
“We’re expanding further, but every time you go to do a deal over there, the rent is horrendous.”
Harvey gave an example of a property in Northern Ireland, which the company was looking to buy, but said “it would have to drop considerably in the south for us to be interested, because it’s too expensive.”
He said another factor restricting expansion into England was the lease situation, with average lease lengths offered at around the 20-year mark.
“Traditionally, Dixons would have taken out all these very long leases and they would be very onerous leases,” he said.
Harvey compared the Dixons situation to Vox, which Harvey Norman took over in 2000, where he believed many franchisees paid far too much for their leases, leading Harvey Norman to renegotiate many leases and close some stores.