Harvey Norman (ASX:HVN) share price down 5% despite strong FY21 growth

Harvey Norman's shares are tumbling despite a record result…

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The Harvey Norman Holdings Limited (ASX: HVN) share price is trading lower on Tuesday following the release of its full year results.

At the time of writing, the retail giant's shares are down 5% to $5.25.

Harvey Norman share price tumbles on FY 2021 results

  • Total aggregated sales up 15.3% to $9,491 million
  • Comparable store sales up 13.9% year on year
  • Earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 54.2% to $1,457 million
  • Profit after tax excluding property revaluations up 63% to record $743.1 million
  • Fully franked total dividend up 45.8% to 35 cents per share

What happened in FY 2021 for Harvey Norman?

For the 12 months ended 30 June, Harvey Norman reported a 15.3% increase in sales to $9,491 million and a 63% jump in profit after tax to $743.1 million.

There were a number of drivers of the company's growth in FY 2021. Management notes that the home-focused Australian consumer has continued to provide an environment of growth. This has underpinned strong growth in technology with increased demand for Smart Phones, Gaming Laptops and PCs that provide power and performance.

In addition, with Australian homes continuing to move quickly to being digitally connected, driven by remote working and learning, categories such as Connected Home, Mobile Technology and Super Wi-Fi have surged.

There was also a strong uptake of the Federal Government's Homebuilder grants program and the renovations that have followed has led to strong demand for kitchen products.

And with more entertaining happening at home, Harvey Norman experienced strong sales in audio visual with higher demand for big screen, in-home experiences. Similarly, outdoor entertainment categories have performed well, as have furniture and bedding categories, and home office categories.

Harvey Norman's strong form allowed the company to declare a fully franked final dividend of 15 cents per share. This brought it full year dividend to 35 cents per share, which is an increase of 45.8% year on year.

What did management say?

Harvey Norman's Chairman, Gerry Harvey, said: "The solid results delivered in the 2021 financial year is a testament to the strength and resilience of the integrated retail, franchise, property and digital strategy, and its ability to adapt and transition to the challenging retail landscape and continue to navigate the uncertainties presented by COVID-19."

"The results achieved this year demonstrates that customers continue to engage strongly with our brands and feel comfortable and safe shopping in our expansive, spacious overseas company-owned and Australian franchised complexes, with easy direct access to large showrooms and warehouses, or the various flexible 'Contactless Click & Collect' and 'Contactless Delivery' options on offer. We have continued to invest in technology, digital transformation and infrastructure to enable our overseas company-owned stores and Australian franchisees to enhance their 'Shop Safe' capabilities and bolster their customer-centric strategies," he concluded.

What's next for Harvey Norman in FY 2022?

The weakness in the Harvey Norman share price today appears to have been driven by its soft start to FY 2022.

Management revealed that rolling lockdowns in most States and Territories have affected sales in July and August. However, it expects spending to recover quickly when lockdown restrictions ease.

According to the update, Australian franchisee sales between 1 July to 26 August are down 19.2% compared to the prior corresponding period. Sales are also down in the double digits in New Zealand and Malaysia for the same reasons.

The Harvey Norman share price is up 12% in 2021.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Harvey Norman Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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