Harvey Norman optimistic

Harvey Norman Holdings Ltd chairman Gerry Harvey is looking forward to a strong Christmas after a tough year of trading and says the Australian economy could recover sooner than expected.

Harvey Norman on Tuesday reported a 3.8 percent lift in total sales to $6.03 billion for 2008/09, but this was mich weaker than the growth of 8.7 percent recorded in the previous financial year.

Like other retailers, the group has suffered from the negative impact of the global recession and economic downturn in Australia on consumer confidence and spending.

But Mr Harvey said while retail margins remain under pressure he was optimistic about the future, saying the federal government's stimulus package had improved sentiment, just as the economy appeared set to improve.

"Everyone was talking about the end of the world and Armageddon and there's no talk of that anymore," Mr Harvey told AAP in an interview.

"They're talking about when it's going to get better and how it's getting better now.

"All you know is that (the stimulus package) helped, but you can't tell by how much, and the other thing that's good is that the levels of confidence are so much higher now than they were six to nine months ago."

The homewares and electric goods company also reported on Tuesday that 2008/09 like-for-like store sales had risen by a mere 1.4 percent, after 4.4 percent in the previous year.

Total sales in the fourth quarter were up 4.5 percent, or two percent on a like-for-like basis, to $1.49 billion from the previous corresponding quarter for its stores in Australia, New Zealand, Slovenia and Ireland.

Most of the growth was in Australia, where sales rose 6.7 per cent, or by five percent on a like-for-like basis.

"We're hopeful it will be pretty strong until Christmas because of the level of confidence there," Mr Harvey said.

"If the economy can start recovering a bit now and unemployment doesn't get above six or seven percent then that should be a pretty good Christmas."

The domestic unemployment rate is currently 5.8 percent, and some private sector forecasters say it could rise to 7.5 percent in 2010.

Mr Harvey said the most popular consumer categories were technology, furniture and bedding.

But the business' home improvement and carpeting division was struggling.

Retail analysts said because investors had anticipated Harvey Norman would report better sales results the stock closed down 21 cents, or 6.05 percent, to $3.26.

Austock retail analyst Thomas Hodson said the sales figures were satisfactory but not spectacular and retained his hold recommendation for the stock.

"Whilst it wasn't a disappointing result there wasn't enough in the release to justify that recent run up in share price," Mr Hodson said.

"We're looking for the housing activity in the economy to turn the corner before we'll become bullish on Harvey."

IG Markets institutional dealer Chris Weston said investor had been positive toward Harvey Norman after department store group David Jones Ltd and electronic goods company JB Hi-Fi Ltd recently upgraded theirs full year earnings outlooks.

"The stock has had a good run in recent times in anticipation of a strong number with positive sentiment feeding through from David Jones," Mr Weston said.

"On a like-for-like basis the market wanted stronger than 1.4 percent growth it recorded.

"Given the weak number, traders will be seeing David Jones and earnings season darling JB Hi-Fi as the place to be."

Mr Harvey the group's operation in Ireland was still struggling.

"Ireland is very ordinary, it's an economy that's really in bad shape," he said.

"The stores over there are down 20, 30, 40 percent on last year."

Mr Harvey said the company wasn't closing any of the 16 stores in Ireland, despite all of them losing money.

"We're trying to work out how to come out of Ireland as a strong retailer but it's very difficult," he said.

 

- AAP