ASX 200 retail stock Harvey Norman Holdings Ltd (ASX: HVN) has been strong in 2024 and is up 15% this year.
The company now finds itself in the legal spotlight after Echo Law launched a class action against the retail giant.
The stock is currently trading at $4.85 per share, and investors are now questioning what lies ahead for this ASX 200 retail stock. Let's dive in and see.
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ASX 200 retail stock class action
Echo Law's class action targets the ASX 200 retail stock's 'Product Care,' an extended warranty that claims to offer additional protection on electronics and white goods.
The lawsuit alleges that this warranty provides "little or no value" beyond the rights and protections already guaranteed to consumers under Australian Consumer Law.
According to Echo Law, some customers of Harvey Norman, Domayne, and Joyce Mayne have been sold these warranties since September 2018.
The legal firm argues that Product Care is simply a way for Harvey Norman to charge customers an additional surcharge of the product price.
It reportedly heard from customers "who are furious that they've paid thousands of dollars for Product Care over the years and for little or no benefit".
Harvey Norman has not put out any statements in response at this point in time.
Market response
This isn't a price-sensitive update, nor is it an announcement made by the company, period. So it's unsurprising to see the ASX 200 retail stock un-moved by the news, trading less than 1% higher today.
It's also essential to remember that a class action lawsuit changes nothing fundamental about a company – it's operations, its products, and so forth.
Whether the lawsuit eventuates or is successful or not, the company will still be doing tomorrow what it did yesterday and the day before that.
But the legal challenge does come during a challenging broad retail environment. Harvey Norman posted a 30% drop in profit before tax in FY24, citing weaker consumer spending and rising operational costs.
Despite the legal hurdles and financial headwinds, many are still bullish on the ASX 200 retail stock. Evans & Partners is one of these firms. It recently upgraded the stock to positive.
Meanwhile, five brokers out of a total of 13 rates it a buy according to CommSec data.
Foolish takeaway
ASX 200 retail stock Harvey Norman may have a potential class action on its hands if Echo Law is successful.
Importantly, this doesn't change any fundamentals of the business, or its financial outlook.
Harvey Norman shares are up nearly 22% in the past year.
