Harvey Norman (HVN) operates in the retailing sector principally as a franchiser. The stores sell homewares, electrical products, and computers. Revenue is derived from retailing, the provision of advisory and advertising services to franchisees, and property investment. The company has about 167 outlets in Australia, New Zealand, Slovenia and Ireland and investments in controlled entites Rebel Sport and Pertama Holdings (Singapore).

HVN strategy is to leverage its scale to buy in bulk and derive higher margins. Scale also enables HVN to offer unique promotional activities for its customers.The rise of value focused retailers such as JB Hi Fi is a threat which HVN is combating through the expansion of its Joyce Mayne format. These stores aim to differentiate from the traditional HVN brand selling premium brands.HVN is launching its own Office Works format called OFIS. Management believes there is room for another competitor in this market. HVN has secured five sites and we expect the rollout of further stores to be managed to ensure the format is working well.International expansion remains the wild card which could deliver significant returns. HVN is targeting Ireland as a testing field to develop and use as a launch pad into the UK. International expansion remains early stage but to date the indicators look promising.Harvey Norman Holdings reported NPAT up 77.4% to $407.25m for the year ended 30 June 2007. Revenues from ordinary activities were $1.33Bn, up 20.4% from last year. Sales for the year ended 30 June 2007 from the franchised Harvey Norman, Domayne and Joyce Mayne complexes, company-owned stores in New Zealand, Slovenia, Ireland and other trading operations (excluding operations of Pertama Holdings-Singapore and Rebel Sport) totalled $5.34Bn compared to $4.58Bn for the prior year, an increase of 16.5%. Diluted EPS was 38.36 cents compared to 21.68 cents last year. Net operating cash flow was $419.48m compared to $161.64m last year. The final dividend declared was 6 cents, taking the full year dividend to 11 cents compared with 8 cents last year. The company advised further that it will continue to rollout new stores into the 2008 financial year. Previously stated goal of a minimum of 15 new sites per annum will be achieved this year in addition to an active program of store upgrades, refurbishment and enhancement.

30/06/08

Leading Index

ASX 100

Sector Index

Consumer Discretionary

Industry Group

Retailing