The Harvey Norman Holdings Limited (ASX: HVN) share price is falling on Friday.
In morning trade, the retail giant's shares are down 3% to $3.44.
Why is the Harvey Norman share price falling?
Investors have been selling the company's shares today after the announcement of a massive share buyback was offset by the release of a poor trading update.
In respect to the latter, for the three months ended 30 September, Harvey Norman posted a 9.1% decline in aggregated sales from its overseas operations and independent Harvey Norman, Domayne, and Joyce Mayne branded franchised complexes in Australia. Comparable aggregated sales were down by 10% compared to the prior corresponding period.
Margin pressures have also been weighing on the company's performance. This has led to its earnings falling at a much quicker rate.
According to the release, its unaudited preliminary accounts for the consolidated entity indicate profit before tax and non-controlling interests of $86.23 million. This is down 49.1% compared to the $169.45 million recorded in the prior corresponding period.
Share buyback
Failing to lift the Harvey Norman share price today is news that the company plans to buy upwards of 10% of its shares back.
Based on yesterday's closing share price, the cash cost would be approximately $442.3 million.
Subject to market conditions, the company expects to commence the buyback in November and complete it within 12 months. Management commented:
The Board of HVN believes that the buyback is an appropriate capital management strategy, particularly having regard to recent share price history. The Board will continue to monitor and assess opportunities for growth and retain financial flexibility in order to execute strategy.
