The herd searching for a good growth story settled on Harvey Norman for a short while yesterday after chasing hard after JB Hi Fi the day before.
They ran the JBH share price up to a new record of $16.82 on Tuesday on the company's confirmation that the first half so far was strong, and that it was on track to meet the forecast 33% gain in sales for the full year.
JBH shares closed lower yesterday at $16.40, down 48c as the herd switched focus for a while to Harvey Norman after directors made a rare forecast for first half earnings. They said first half profits (before one-off items) could be up 25% to 35% for the six months to December 31.
The shares reacted sharply, jumping 50 cents to $7 at one stage before retreating to shed much of the madcap gains of the morning. They closed at $6.78, up 28c: the shares are up around 77% so far this year.
The fade came as investors focused on what was a slower rate of growth in sales than JB Hi-Fi and slower than expected growth in same store sales.
HVN said first quarter sales were up 12% and same store sales were up 5.7%: that's slower than a year ago and slower than in 2007 financial year.
Harvey Norman is the country's biggest electronics retailer and furniture and whitegoods group and the forecast puts first-half profit around $180 million, thanks to surging demand for consumer entertainment products such as flat-panel televisions, notebook computers and software.
In some respects investors are more besotted with gadgets like LCD TVs, Ipods and the like, than consumers.
Driven by rising consumer incomes and falling prices because of the strong dollar (and product price cuts by manufacturers), these consumer products are more than making up for slow trading conditions in other parts of the Harvey Norman offering, such as whitegoods, furniture and carpets.
The company said in a statement to the ASX on first half sales that its earnings before one-off items may rise between 25% and 35% in the six months to December 31, from the $132.8 million earned in the first half of the 2006-07 financial year.
The news on the earnings picture was new and something the company hasn't done before in its quarterly earnings updates.
But directors said it was making the news public because it was aware of analysts who were looking at a much smaller profit increase.
"The directors of the company are aware of some commentary by analysts in relation to market expectations about the projected profit of the company for the year ending 30 June 2008.
"The company understands that the published commentary by analysts who regularly publish commentary about the prospects of the company is that, in the respective opinions of those analysts, the net profit after tax ("NPAT") of the company, excluding net property revaluation increment, for the twelve months ending 30 June 2008 will increase within a range of 12% to 28% over the NPAT, for the twelve months ended 30 June 2007. Directors of the company are not prepared to speculate on NPAT for the year ending 30 June 2008.
"The net profit from continuing operations attributable to members, after tax and minority interests, but excluding significant one off items and net property revaluation increment ("Net Profit from Continuing Operations") for the six months ended 31 December 2006 was $132.87 million.
"The directors of the company expect the Net Profit from Continuing Operations for the six months ending 31 December 2007 will increase within a range of 25% to 35% over the Net Profit from Continuing Operations for the six months ended 31 December 2006."
That was released at 10.23 am, just after trading started in the morning, and off the shares went.
The company said first-quarter sales rose 11.6% to $1.39 billion. Same store (comparable) sales from stores open at least a year rose 5.7%. That's sharply lower than the 15.4% for the final quarter of 2007 and the 9.5% same store growth seen in the same quarter. Sales rose 16.5% and 8.6% on a same store basis for the 2007 financial year, so the slowdown in the first half has been noticeable, despite the obvious boom in Consumer Entertainment products.
The company has wholly owned retailing businesses in new Zealand, Ireland and Slovenia, and an indirectly owned business in Singapore. Could it be there gloss is going off HVN in its overseas and more traditional businesses.
The company is riding the rising US dollar in Australia, but that would be hitting earnings from its foreign outlets.
Meanwhile, NSW-based Ladies fashion retailer Noni B (NBL) is doing it a bit tougher than Harvey Norman.
Noni-B shareholders were told yesterday that retail market conditions remain challenging, particularly in the home state of NSW.
The retailer, which operates more than 200 Noni B, Liz Jordan and La Voca stores across Australia, lost momentum in the second half of 2007 as drought and odd seasonal weather in NSW and parts of other states clipped revenue growth to a crawl.
Chairman Robert Critchley told the AGM yesterday that Noni B remains cautious about the year ahead, following those flat sales in the first few months of fiscal 2008.
"As we advised in August, we are cautious about prospects for the first half of the current year." So far, overall sales have been flat and it has been a difficult first four months."
Mr Critchley was confident the company would see a second half rebound (a reverse of what happened in 2006-07).
"We still feel positive about our overall prospects for the year to June 2008, and believe that any slowness in the first half will be well offset in the second half with many new initiatives that we are introducing that should have a significant positive impact on our results going forward," he said.
Noni B reported a net profit of
