The Harvey Norman Holdings Limited (ASX: HVN) share price is rising on Thursday.
In morning trade, the retail giant's shares are up 2% to $3.92.
This follows the release of Harvey Norman's FY 2023 results.
Harvey Norman share price falls on results release
- Revenue down 3.8% to $9,193 million
- Earnings before interest, tax, depreciation, and amortisation (EBITDA) down 21.3% to $1,130.7 million
- Profit before tax down 27.8% to $680.2 million
- Net profit after tax down 33.5% to $539.5 million
- FY 2023 fully franked dividend down 33% to 25 cents per share
What happened in FY 2023?
For the 12 months ended 30 June, Harvey Norman reported a 3.8% decline in revenue to $9,193 million. This comprises aggregated headline franchisee sales revenue of $6,417 million and company-operated sales revenue of $2,776 million.
Also heading in the wrong direction were the company's operating expenses, which increased 8.1% over the 12 months. Management notes that this was due to its expenses being abnormally low last year due to COVID restrictions. Total operating expenses as a percentage of total system sales revenue stood at 17.68%, which is comparable to pre-pandemic levels.
However, the combination of softer sales and higher expenses means that Harvey Norman's profits took a big hit in FY 2023.
Profit before tax (excluding property revaluations) was down 27.8% to $680.2 million. Though, it is worth highlighting that this is still almost 35% higher than pre-pandemic profits and represents a four-year compound annual growth rate of 7.8%.
Some of this weakness was blamed on macroeconomic headwinds, a deterioration in business and consumer confidence, and the normalisation of margins and operating costs globally in the post-COVID environment.
Unsurprisingly, with its profits under pressure, the Harvey Norman board decided to cut its dividend. A fully franked final dividend was declared, which brought its total dividends to 25 cents per share in FY 2023. This is down 33% on last year's payout.
Management commentary
Harvey Norman's chair, Gerry Harvey, commented:
We are confident in the quality of the Harvey Norman, Domayne and Joyce Mayne brands and the solid market position of our Australian franchisees and overseas company-operated stores. We are committed to delivering stable returns and sustainable growth for our stakeholders and are well-placed to benefit from any upturn in trading conditions and any growth that may arise from the home renovation cycle, new home starts and net migration increases. We are on track to deliver our Malaysian expansion plan as announced last year, and are committed to strengthening our brands and global footprint.
Outlook
No guidance has been provided for FY 2024. However, management has provided an update on its sales until the end of July.
That update shows that sales are down across all but one region, with its local operations among its worst performers. Australian Franchisee sales are down 12.3% for the two months, with comparable store sales down 12.6%.
The only region posting positive sales growth is Malaysia, which has been boosted by the opening of new stores. Total sales are up 0.6% but comparable store sales are down 5.7%.
Those store openings won't be the last. Management advised that it plans to increase its footprint in Malaysia to 80 stores by the end of 2028. This compares to 30 today.
The Harvey Norman share price is now down 8% over the last 12 months.
