The Harvey Norman Holdings Limited (ASX: HVN) share price has come under pressure after the release of its half year results.
At the time of writing the retailer's shares are down 7.5% to $3.99.
How did Harvey Norman perform in the first half?
For the six months ended December 31, Harvey Norman reported a 1.9% increase in total sales revenue to $4.07 billion. This was driven by a 7% increase in offshore sales to a record $1.12 billion and broadly flat headline franchisee sales revenue of $2.95 billion.
Comparable store sales were up 1.6% on the prior corresponding period thanks to a 5.9% lift from its offshore businesses.
Australian comparable store sales were flat during the half. Management advised that the soft performance in the Australian market was driven by the widespread bushfires and severe reductions in air quality. It notes that these impacts coincided with peak Christmas trading.
Profit before tax fell 4.6% over the prior corresponding period to $301.15 million. The company's profits were impacted by a decrease in the net property revaluation increment. This was mainly attributable to a net decrement for a residential zoned property in NSW, with no flow-on impact to the rest of the portfolio. Also impacting its profits was the first-time application of AASB 16 Leases, which resulted in a $5 million increase in expenses.
Excluding the impact of property revaluations and AASB 16 Leases, Harvey Norman's profit before tax would have lifted 2.4% to $285.87 million.
Reported net profit after tax was down 4.1% over the prior corresponding period to $213.59 million and earnings per share fell 7.4% to 17.7 cents.
The Harvey Norman board declared a fully franked interim dividend of 12 cents per share, which was flat on last year's interim dividend.
Outlook.
No guidance was given for the full year, but the company has revealed that it has had a slow start to the second half. It advised that aggregated franchisee sales for the period from January 1 to February 27 decreased by 3.2% compared to the same period last year and 3% on a comparable store basis.
Management advised: "The first three weeks of January saw bushfire conditions worsen across New South Wales, Victoria and into South Australia, with consumers very cautious and unwilling to spend on discretionary retail until the threat had moderated."
The company also notes that extreme rainfall and flooding in some areas has caused a continuing hesitancy towards discretionary retail expenditure. And in respect to the coronavirus outbreak, management expects consumer and business confidence to take another hit until the threat is understood and mitigated.
And while its international operations have started the half largely positively, it hasn't been enough to keep some shareholders on board today.
