Shares in retailer, Harvey Norman, eased, then firmed in a small range yesterday on confirmation that 2008 sales growth slowed, but didn’t tank as some in the market had feared earlier this month.
The shares ended down 3 cents at $3.28, still 10% above where they were 10 days or so ago.
The shares went for a small recovery in the upbeat market, climbing above $3.50 late last week, before easing in the bank-driven sell off from last Friday.
Today the retailer said that full year sales growth nearly halved compared to the double digit growth achieved in 2007, but that was about as bad as it got.
Harvey Norman revealed an 8.7% rise in topline sales for the full year to June 30 to $5.81 billion. That was almost half the 16.5% growth achieved in the boom year of 2007.
On a like-for-like basis (that is stores open a year or more), 2008 sales grew 4.4%, which was a touch under headline inflation for the 2008 year of 4.5%.
Harvey Norman said 4th quarter sales from its franchised stores, commercial divisions and other outlets in Australia, New Zealand, Slovenia and Ireland but excluding Singapore totalled $1.43 billion, an increase of 5.2%.
On a like-for-like basis, fourth quarter sales rose 3% in the quarter compared with the final three months of 2007.
The retail giant lifted sales 6.4% to $1.78 billion in the four months to April 30 and like-for-like sales rose 2.5% – down sharply from 6.9% in the first half of fiscal 2008.
Harvey Norman’s top line and like for like-sales-growth has been slowing since late last year, even though it reported solid sales of electronics and consumer entertainment products.
The company’s exposure to the housing sector through bedding and furnishings is hurting. Its sales in NZ and Ireland are under pressure as growth in those economies slows or contracts (as New Zealand did in the June quarter).
NZ and Ireland are also seeing a sharp shake-out in their respective housing sectors. New home building approvals in NZ fell to close to a 22 year low in June, according to figures released yesterday. And, even though the ANZ says profits are going well in NZ, it is still budgeting for an increase in bad debts in the year to September 30.
On the face of it it was a solid result from automotive parts and services provider AP Eagers yesterday with a sharp increase in first half pre-tax profit.
The company told the ASX that unaudited profit before tax jumped to $28.1 million for the six months to June 30, up from $16.4 million in the previous corresponding period.
But it said the increase was due to good news from the Tax Office: an $11.5 million benefit from a tax refund of overpaid GST on holdback payments.
Of the $11.5 million tax refund, $7.1 million has already been received from the Australian Tax Office, with the balance expected by the end of August.
"As there is a small chance that the unpaid balance of $4.4 million may be subject to an appeal process, a final decision will need to be made by the company whether there is sufficient certainty to include the unpaid balance in the June 30 2008 financial statements," the company told the ASX.
AP Eagers said its parts and service department and its finance business had both shown improved profitability in the first half.
"This has substantially offset the more difficult trading conditions of the last quarter experienced in the new and used car markets," it said.
That’s why when the tax refund is deducted, earnings rose marginally: trading profit for the half was $16.6 million, up slightly from $16.4 million in the boom-like first six months of 2007.
The tougher trading environment was caused by higher interest rates from the Reserve Bank and the banks generally, reduced consumer credit availability, higher fuel costs and car price deflation. These caused what the company called "significant depreciation in used car inventory values".
This is what is happening in car markets around the western world as rising oil prices cause customers and buyers to move away from petrol chewers, towards more fuel-efficient vehicles. That brings pressure on second hand values and forces up depreciation rates in lease contracts. That in turn puts pressure on the companies offering the finance.
"AP Eagers ability to facilitate finance offerings for its retail customers has significantly improved and is now more attractive and highly competitive when compared to traditional bank lending for vehicle purchases.
"In part, this improved competitiveness is a result of the general tightening in the availability of consumer credit from banks and other sources in recent months," the company said in its one page statement to the ASX.
The company left interim dividend steady at 22c a share, a sign of the real situation in the car markets and the economy generally. It is tough and there are no real gains out there.
The full audited interim results will be released on August 29.
APE shares finished up 10 cents at $10.20.
