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Australia's Harvey Norman slumps on lower half-year profit

Published 02/27/2023, 06:40 PM
Updated 02/27/2023, 07:41 PM
© Reuters. Shoppers walk the furniture showroom at a Harvey Norman outlet in Sydney, Australia, February 27, 2017.  REUTERS/Jason Reed

(Reuters) -Shares of Harvey Norman slumped more than 10% on Tuesday after Australia's biggest electronics retailer posted a 15% drop in its first-half profit as the cost-of-living pressures crimped discretionary retail spending.

Consumers continue to tighten their household budgets amid rising borrowing costs and sky-high inflation, resulting in a decline of sales across Harvey's key divisions in Australia and New Zealand.

E&P Financial analyst Phillip Kimber said the overall result was likely well below consensus estimates while Jarden analysts said the result was soft with a lack of capital management.

Shares of Harvey dropped up to 11.4% to hit their lowest levels since July 1, 2022.

Last month's sales momentum across Australia and New Zealand franchisees slowed 10.2% and 8.1%, respectively, in local currencies, the retailer said in a trading update.

Higher interest rates drove up finance costs during the reported half, Harvey said, while its other expenses rose 47% to A$58.4 million ($39.37 million) from spending on customer loyalty programmes.

The New South Wales-based retailer also slashed interim dividend to 13 Australian cents per share from 20 cents last year.

© Reuters. Shoppers walk the furniture showroom at a Harvey Norman outlet in Sydney, Australia, February 27, 2017.  REUTERS/Jason Reed

The company reported profit after tax attributable for the six-month period ended Dec. 31 of A$365.9 million, compared with A$430.9 million last year.

($1 = 1.4835 Australian dollars)

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