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Harvey Norman’s mixed results show impact of store closures

Image of Harvey Norman store in Slovenia
Image of Harvey Norman store in Slovenia

Global furniture chain Harvey Norman’s second-half sales reflect the economic impact of different governments’ attempts to stop the spread of COVID-19.

In Australia, where Harvey Norman franchisees were allowed to keep stores open as long as they complied with social distancing requirements, sales were up 17.5 per cent in H2 to May 31, compared with the same period last year.

But in New Zealand, Northern Ireland, Slovenia and Croatia, where the retailer operates wholly-owned company stores, and in Malaysia and Singapore, where it operates majority-owned and controlled company stores, sales were down across the board.

The only outlier was Ireland, where Harvey Norman operates wholly-owned company stores and saw a significant sales increase in H2 to May 31, despite only being allowed to fully reopen stores on June 8.

The trading update released on Wednesday also underlines the boom-or-bust nature of the global pandemic for retail.

While fashion and other discretionary categories suffered from concern over job losses and the tanking economy, supermarkets, office supplies stores, furniture and homewares retailers and businesses selling books, puzzles and games saw record months, as millions of people went into self-isolation and started working from home.

Businesses had to walk a fine line between making the most of an unexpected opportunity and taking advantage of people affected by COVID-19 and the economic fallout.

Executive chairman Gerry Harvey was forced to explain himself after downplaying the health risks of the coronavirus and describing it as a sales opportunity for his business in a 60 Minutes interview in late March.

He later clarified that he was hoping to remind Australians not to panic and said he regretted the comments.

“Now, everyone thinks I’m this callous old bastard out making a profit on other people’s misery … but believe me, that was not my intention,” Harvey told The Sydney Morning Herald and The Age.

New Zealand

In New Zealand, Harvey Norman closed all 39 of its bricks-and-mortar stores from March 26 to May 13, and stopped selling online from March 26 to March 30, in line with government requirements. It was allowed to sell essential products online from March 31, and was able to sell any product online from April 28.

Sales were down 7.8 per cent year on year in constant local currencies for the H2 period to May 31, and down 1.1 per cent for the FY20 period to May 31.

In Australian dollars, sales were positively affected by a 1.4 per cent appreciation in the New Zealand dollar for the period from July 1, 2019, to May 31, 2020, compared to the previous corresponding period.

Malaysia

In Malaysia, the company closed its 23 stores from March 18 to April 17, in line with government requirements, and gradually reopened individual stores, starting with just the electrical and computer categories, and eventually furniture and bedding, between April 18 and May 12. Online trade resumed from April 18 for the electrical and computer categories only.

Sales were down 4.2 per cent year on year in constant local currencies for the H2 period to May 31, and up 6.5 per cent for the FY20 period to May 31, thanks to a strong 15 per cent sales uptick in H1.

In Australian dollars, sales were positively affected by a 5.2 per cent appreciation in the Malaysian Ringgit during FY20 to May 31, compared to the previous corresponding period.

Ireland

Harvey Norman closed its 13 company-operated stores in Ireland from March 25 to June 7, only fully reopening on June 8. However, the electrical and computer categories of its stores were only closed from March 28 to May 18. The retailer was able to trade online throughout the shutdown.

Despite store closures, sales were up 18.8 per cent in constant local currencies for the H2 period to May 31, compared to the prior corresponding period, and up 13.4 per cent for the FY20 period to May 31.

In Australian dollars, sales were positively affected by a 3.6 per cent appreciation in the Euro during FY20 to May 31.

Northern Ireland

Harvey Norman’s two stores in Northern Ireland were closed from March 24 to June 7, in line with government requirements.

Sales were down 43.2 per cent year on year in constant local currencies for the H2 period to May 31, and down 12.2 per cent for FY20 to May 31.

However, in Australian dollars, sales benefited from a 4.1 per cent appreciation in the UK pound during FY20 to May 31, compared to the prior corresponding period.

Slovenia and Croatia

In Slovenia, Harvey Norman’s five stores were closed from March 16 to April 19. All stores and categories reopened on April 20. Harvey Norman’s only store in Croatia closed from March 19 to April 26. The retailer continued to trade online in both markets through the period.

Combined sales in the two markets were down 10.9 per cent in constant local currencies in the H2 period to May 31, and down 1.5 per cent for FY20 to May 31.

In Australian dollars, sales were positively affected by a 3.6 per cent appreciation in the Euro during FY20 to May 31.

Singapore

Harvey Norman’s 12 company-operated stores in Singapore closed on April 7 and remain closed by government decree. The retailer has continued to trade online during the store closures, and anticipates being able to reopen offline later this month.

Sales in constant local currencies were down 26.1 per cent for the H2 period to May 31, compared to the prior corresponding period, and down 18 per cent for FY20 to May 31, due to a poor H1, when sales fell 11.9 per cent.

In Australian dollars, sales benefited from a 5.8 per cent appreciation in the Singaporean dollar in the period.

This story first appeared on sister site, Inside Retail Australia.

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