Harvey Norman chairman, Gerry Harvey is not surprised by the forecast of a profit decline for the retailer, however he had hoped sales would have been better, he told Appliance Retailer.
“I track from week to week to see how we are going, and sales are down on the Covid years, but it is still one of the best years we have had since pre-Covid. Our goal is to try and figure out how to make a billion a year like we did in the Covid years.”
As to how realistic that is he was confident it would occur, “it’s just a matter of when”.
Asked about a recession and he thinks the chances are one in 10, adding that in a recession it is around 8-10% unemployment “and while that might happen, at the moment we are not even close to that”.
“If we do have a recession, I think it would be mild. There is so much infrastructure spending by governments and there is money in the community from the wealth effect of the one-third of people who own their homes outright and another one-third who have half paid off their homes. House prices seem to be going up which is quite different to what it was six months ago.”
And while some stores are doing better than others, he expects growth will come from regional areas, as drought conditions disappear, sheep, cattle and commodities have prices have done well and more people move into country and regional areas.
He admitted foot traffic is down although one category that benefited from sales is bathroom products which he attributed to a backlog of renovations, “but it is a small part of our business.”
Harvey has been ringing around stores in Australia and overseas for the past few weeks to get an idea of where the group is heading in the next 12 months. He said New Zealand which is going through a recession will be interesting to watch although employment levels, like Australia, remain high.
“High unemployment has put employers in a stronger position with more people applying for jobs which looks like continuing and that means less pressure on wages.”
Looking ahead, he said the advertising blitz in newspapers, TV and radio would continue here and in New Zealand. “We used to be heavy in catalogues which we don’t do anymore and we push hard on newspapers more than anyone. We have taken over newspapers like no other retailer has done.”
Harvey acknowledges that retail is under a lot of pressure. “Big retailers can withstand the headwinds, but smaller retailers might have cashflow problems and when sales decline there is no backup. Harvey Norman is a big public company with lots of assets, if we hit trouble then everyone would be in trouble. We have been through tougher times when interest rates were triple what they are now, and years when interest rates were above 10%.”