Following the release of its best half-year result in its 30-year history, this morning the Harvey Norman Holdings Limited (ASX: HVN) share price has edged higher by 1.5% to $5.19.
Here are a few highlights from the release:
- Franchisee aggregated headline sales of $2.9 billion, up 5.2% on the prior corresponding period.
- Company-operated sales revenue up 7% to $976.3 million.
- Earnings before interest, tax, depreciation, impairment and amortisation increased 29% to $430.1 million.
- Net profit after tax rose 38.7% to $257.29 million.
- Earnings per share of 23.1 cents.
- Fully franked interim dividend of 14 cents per share.
I was very impressed to see the retail powerhouse deliver yet another solid half-year result.
Particularly pleasing was the performance of its franchising operations segment. The segment delivered a margin of 6.01%, the best return on aggregated franchisee sales revenue since the Global Finance Crisis.
Its company-operated retail segment performed equally strong with sales growth of 7% on the prior corresponding period. Impressively all of its international operations have grown market share in their respective regions during the period.
Connected technology has been a key catalyst for top line growth. According to the release the insatiable demand from consumers for connected devices has been a big reason why its Home and Lifestyle range has been an exceptionally strong performer.
Should you invest?
At first glance Harvey Norman's shares look to be dirt cheap at around 14x trailing earnings and sporting bottom line growth of 38.7%.
But I wouldn't expect this level of growth to continue for much longer. At the moment the results of both Harvey Norman and rival JB Hi-Fi Limited (ASX: JBH) are benefitting from Dick Smith Electronics' exit from the market.
But I expect that benefit will start to fade in the second-half, impacting sales growth.
For this reason I think the shares of both Harvey Norman and JB Hi-FI are about fair value now and offer limited upside potential.
So rather than invest in them, I would suggest investors take a look at other retailers including Nick Scali Limited (ASX: NCK) and Premier Investments Limited (ASX: PMV).
