Sale statistics for the holiday season have still not been released, and some companies will be reporting half-year and full-year results in February, so soon we will have a complete view of how retail sales have performed at a highly important time of the year.
Over the past six months, Harvey Norman Holdings Limited (ASX: HVN) has gone up about 29% in share price, the second-highest rise amongst S&P ASX 100 Index (ASX: ^XTO) retailers, after Kathmandu Holdings Ltd's (ASX: KMD) 32% increase. What drove the share price appreciation?
Harvey Norman had already risen to a high of $3.02 in April 2013, when in December 2012 it got as low as $1.74. Then third-quarter results in April showed that total sales were down for the year-to-date for every country that the company operated in except New Zealand. The share price deflated to about $2.40 in June and July.
Full-year results came out in August, showing total global sales were down by 3%, and like-for-like were also down 1.5%. Yet, they were better than the third-quarter results, so some improvement could be seen.
Around this time, consumer sentiment was starting to improve and a move in the property market, driven by historically low interest rates, was in full swing. A rise in real estate usually bodes well for retailers because new home owners buy new furnishings and household goods. Those who are selling may be sprucing up and renovating their homes for potential sale.
Electronic goods retailer JB Hi-Fi Limited (ASX: JBH) was also seeing increased sales, with annual revenue up 5.8% to $3.31 billion and NPAT up 11.2% to $116.4 million. Harvey Norman, though, only achieved a 1.9% increase in NPAT before abnormals to $205.8 million.
The first quarter of FY 2014 saw Harvey Norman achieve a turnaround in sales growth. Global sales were up 2.7% compared to the previous corresponding period, and like-for-like sales also surged 4.3%. Finally, the company was getting some traction.
Foolish takeaway
Other retailers like Super Retail Group Ltd (ASX: SUL) and Nick Scali Limited (ASX: NCK) were also up in share price during this time, yet have come down from their recent highs. Harvey Norman has held up well, hopefully buoyed by sufficient Christmas sales. The upward sales trend is also a welcome sign for investors.
The improving economy and the low interest rates will be the main drivers in the first part of this cyclical uptrend. Steady growth in sales and earnings will see Harvey Norman up higher, as it pursues both online and in-store promotions through multi-channel marketing and sales.
