Harvey Norman share price tumbles despite $440m shareholder return

Harvey Norman has had a tough start to the year and the market appears concerned.

| More on:
Woman checking out new laptops.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Harvey Norman Holdings Limited (ASX: HVN) share price is falling on Friday.

In morning trade, the retail giant's shares are down 3% to $3.44.

Why is the Harvey Norman share price falling?

Investors have been selling the company's shares today after the announcement of a massive share buyback was offset by the release of a poor trading update.

In respect to the latter, for the three months ended 30 September, Harvey Norman posted a 9.1% decline in aggregated sales from its overseas operations and independent Harvey Norman, Domayne, and Joyce Mayne branded franchised complexes in Australia. Comparable aggregated sales were down by 10% compared to the prior corresponding period.

Margin pressures have also been weighing on the company's performance. This has led to its earnings falling at a much quicker rate.

According to the release, its unaudited preliminary accounts for the consolidated entity indicate profit before tax and non-controlling interests of $86.23 million. This is down 49.1% compared to the $169.45 million recorded in the prior corresponding period.

Share buyback

Failing to lift the Harvey Norman share price today is news that the company plans to buy upwards of 10% of its shares back.

Based on yesterday's closing share price, the cash cost would be approximately $442.3 million.

Subject to market conditions, the company expects to commence the buyback in November and complete it within 12 months. Management commented:

The Board of HVN believes that the buyback is an appropriate capital management strategy, particularly having regard to recent share price history. The Board will continue to monitor and assess opportunities for growth and retain financial flexibility in order to execute strategy.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Harvey Norman. The Motley Fool Australia has positions in and has recommended Harvey Norman. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Consumer Staples & Discretionary Shares

Stock market crash concept of young man screaming at laptop on the sofa.
Share Fallers

Guess which ASX 200 stock just crashed 31% on slumping sales

The $1.3 billion ASX 200 stock is getting hammered today.

Read more »

Photo of a happy couple with their new car and car keys.
Consumer Staples & Discretionary Shares

Up 55% this year, why Macquarie believes Eagers Automotive shares can charge higher

Eagers set to capitalise as BYD’s Australian sales surge.

Read more »

Two race cars on a track at sunset.
Consumer Staples & Discretionary Shares

Down 36% in a year, this ASX 300 stock is one to watch

After a major sell-off, this high-performance cooling specialist might be gearing up for a turnaround.

Read more »

Two laughing young women hold shopping bags and ride an escalator up to another level in a Scentre Group shopping centre.
Broker Notes

3 ASX consumer sector shares to buy in July: expert

A leading expert has named its top 3 picks.

Read more »

person with large headphones looking puzzled holding their hand to their chin.
Broker Notes

Does Macquarie prefer Harvey Norman or JB Hi-Fi shares?

Both companies have market-beating long-term track records.

Read more »

Person taking out a slice of pizza from a pizza box.
Consumer Staples & Discretionary Shares

Why now is the time to buy the big dip on Domino's shares

Down 46% in a year, a leading expert forecasts brighter days ahead for Domino’s shares.

Read more »

Three people sit on safe cheering with pizza on table
Consumer Staples & Discretionary Shares

Food fight! Have Guzman Y Gomez shares outperformed Domino's since ASX debut?

Lets find out who’s topping the menu for investors

Read more »

Woman chooses vegetables for dinner, smiling and looking at camera.
Consumer Staples & Discretionary Shares

Here's the Coles dividend forecast from top analysts through to 2029

Can this defensive business provide pleasing payouts? Let’s take a look…

Read more »