Harris Technology (ASX:HT8) share price jumps as sales tripled

The Harris Technology Group Ltd (ASX: HT8) share price jumped after it posted a tripling in revenue thanks to the…

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Harris Technology share price FY21 results

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The Harris Technology Group Ltd (ASX: HT8) share price jumped after it posted a tripling in revenue thanks to the online shopping boom.

The Harris Technology share price added 4% to 12.5 cents at the open when the overall market slipped into the red.

The company reported a 206% surge in FY21 revenue to a record $41.8 million as net profit improved 73.6% to $1.8 million.

Harris Technology share price benefiting from good timing

Harris Technology couldn’t have picked a better time to complete its pivot to becoming a fully-fledged online retailer.

Its decision to close its brick-and-mortar shopfronts was made well before COVID-19. What’s more, it’s benefitting from the latest delta lockdowns that’s crippled Melbourne and Sydney.

Consumers have flocked to online shopping to wild the time away in isolation. Harris Technology is launching new websites to capture more organic search engine traffic and claims to be a major retailer on Amazon and eBay.

Other growth drivers behind HT8’s FY21 results

But Harris Technology also credits its agility to capitalise on the dynamic environment. The company started selling personal protective equipment (PPE) and expanded into games. Demand for both categories of products helped with its record full year sales.

“This excellent result was achieved despite increased competition in both the tech retail and online retail spaces which had an impact on margins,” said its chief executive Garrison Huang.

“But as a pure-play online retailer, it was pleasing that Harris Technology was able to maintain margins circa 18% with a rapidly growing presence across all major eCommerce marketplaces.”

Margins and inventory questions

But this isn’t to say that the company isn’t experiencing some pricing pressure either, or at least a lack of operating leverage. Its gross margin jumped an impressive 185% in the year, but that’s slower than its top-line growth.

Harris Technology added that it was continuing to invest in its inventory. The value of this asset has increased to $10.7 million at June 30, 2021. This compares to $3.3 million the year before.

“By securing these highly in demand products due to the global chipset shortage, the company is well positioned to turn over higher volumes of products in the coming months,” said the company.

“This will also be accommodated by a proposed upgrade in warehouse facilities in November 2021 to consolidate 4 small warehouses into 1 large complex that will improve operating logistics and optimise rental expenditure for better use of space.”

Foolish takeaway

Let’s hope that Harris Technology is better skilled at managing inventory than Kogan.com Ltd (ASX: KGN).

As Kogan’s shareholders found out, the problem with many electronic goods is the short life cycle. This could lead to painful write-downs for unsold goods.

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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia owns shares of and has recommended Kogan.com 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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