Harvey Norman share price slips despite FY22 sales nearing $10b

The ASX 200 retailer posted an after-tax profit of $811.5 million and $1.4 billion of EBITDA.

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Key points

  • The Harvey Norman share price is falling 2% to trade at $4.24 after the company posted its full-year earnings
  • The retail giant's profit tumbled 3.6% year on year while its EBITDA slipped 1.4%
  • The company posted a 17.5 cent final dividend, boosting its full year dividends 7.1% to 37.5 cents

The Harvey Norman Holdings Limited (ASX: HVN) share price is in the red after the company posted its earnings for financial year 2022.

Shares in the S&P/ASX 200 Index (ASX: XJO) electronics and homewares retailer opened at $4.33 each this morning and slipped to an intraday low of $4.23 a share.

At the time of writing, the Harvey Norman share price is $4.24, 2.08% lower than its previous close.

Harvey Norman share price falls on FY22 earnings

Here are the key takeaways from the ASX 200 giant's full-year results:

Harvey Norman revealed 25% of its pre-tax profits, excluding property revaluations, last financial year came from its overseas retail stores.

In Australia, its franchisees were impacted by COVID-19-induced lockdowns in the first half. The segment's pre-tax profit fell 12% year on year to $628.19 million despite it posting a record second half.

The company's property segment closed the period with assets exceeding $3.7 billion and a $366.5 million pre-tax profit – a 25.7% improvement.

What else happened in FY22?

The retailer opened three new Australian company-owned stores in FY22, located in Murwillumbah, Port Pirie, and Charters Towers. It also opened a new company store in Malaysia and a commercial outlet in New Zealand.

The Harvey Norman share price tumbled 32% over the 12 months to 30 June.

What did management say?

Harvey Norman chair Gerry Harvey commented on the company's results, saying:

Our omni channel strategy continues to deliver, our balance sheet is strong, our cash reserves are solid and we continue to maintain a low net debt to equity ratio of 10.31%. With experienced management, we have grown our integrated retail, franchise, property, and digital business across eight countries to nearly $10 billion in system sales.

Cash conversion in FY22 has significantly improved compared to FY21 predominantly due to a $53.43 million increase in net cashflows from operating activities, from $543.87 million in FY21 to $597.30 million for FY22. The solid cash flows generated from operating activities this year will enable us to further enhance and promote our brand locally and overseas to grow our businesses, refurbish our existing stores and invest in new property acquisitions and pay down external debt.

What's next?

The company didn't provide any new earnings guidance today. However, it outlined a number of expectations for the current financial year and provided a trading update.

It plans to open two new franchised complexes in Australia and relocate another to a freehold property in FY23. Overseas, it opened its 16th company-operated store in Ireland in July and expects to ramp up its offshore expansion plans with four more company-operated stores in New Zealand, Malaysia, and Croatia.

The period from 1 July to 29 August saw its sales grow in all regions except Ireland and Northern Ireland. They saw respective decreases of 1% and 10.2% on those of the pcp.

Australian sales, meanwhile, lifted 10.7%, while those of Malaysia and Slovenia and Croatia rose 108% and 12.2% respectively.

Harvey Norman share price snapshot

The Harvey Norman share price has had a rough trot of late.

It has fallen 14% since the start of the year. It's also currently 21% lower than it was this time last year.

For comparison, the ASX 200 has sunk 8% year to date and 7% over the last 12 months.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Harvey Norman Holdings Ltd. The Motley Fool Australia has positions in and 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 Scott Phillips.

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