By Keri Algar
SYDNEY, NSW: Amidst such challenges as green management and an “immature brand positioning” came the GFC and the Irish banking meltdown, causing significant contractions across most of Harvey Norman’s consumer electronic and home furnishing divisions, said Callard.
“The electrical and furniture industries in Ireland are reeling,” he said.
“It is estimated that the demand for furniture has dropped by over 60 per cent since June 2008, and is recovering extremely slowly. Most electrical and technology categories have contracted by between 40 and 50 per cent since the peak.
“In short, this has made for very difficult trading conditions and significant market consolidation.”
A look at independent industry body Retail Ireland’s September statistics, where all the major retailers were obliged to provide data by law, reveals a predictable upward spike in both value and sales in mid 2009 for the electrical and furniture segments, however, since early-to-mid 2010, it shows that negative growth is compounding, especially for furniture, indicating a market shakeout could be on the horizon.
“The timing of our rapid expansion here could not have been worse, and immature stores combined with a massive downturn in spending had the expected effect on our net profits.”
In 2009, Harvey Norman Ireland reported a $49.33 million trading loss, followed by a trading loss for the year ended June 2010 of $42.65 million. There was also an additional impairment loss of $27.29 million and $7.80 million for 2009 and 2010 respectively.
Notwithstanding these losses, Harvey Norman has stated it is committed to its Irish operation, comprising of 16 leased stores and 800 employees. Callard thinks Harvey Norman is well positioned to handle a shakeout.
“One misconception is that Harvey Norman is a small struggling player in a vibrant competitive market, and that we are simply being out-classed. This is definitely not the case.
“In consumer electronics, we are the clear number two retailer in both revenue and retail floor space. According to GfK, we may be the biggest in some segments of the flat panel market. Number one in consumer electronics is the Dixons Retail Group trading under the brands PC World and Curry’s. They are also not profitable in Ireland,” continued Callard.
“Aside from Harvey Norman and Dixons, there is a stalling Irish national chain, a healthy Dublin only retail group, and the usual clusters of independents. That is the entire Irish market.
“We believe there will be further significant consolidation in 2011.”
“In furniture and bedding, the Irish retail landscape is in even worse shape. There is enormous opportunity for Harvey Norman to emerge as the premier furniture destination in a market with no competitors of any scale.”
Callard said that one major furniture player, Reid Furniture, has already closed the majority of its stores, from nine to two. Additionally, the Irish darling of furniture retail, Arnotts, is now under bank management, meanwhile Ikea has a presence of only one shop.