Harvey Norman Holdings Ltd (ASX: HVN) shares are trading 2.68% lower at $4.91 per share on Wednesday.
There is no news from the ASX 200 electronics and home furnishings retailer today.
Therefore, Harvey Norman shares are likely trading lower because the stock has gone ex-dividend today.
Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is up 0.2% as it rides on the tailcoats of yesterday's interest rate decision.
In line with market expectations, the Reserve Bank decided to keep interest rates on hold.
Despite the market anticipating this call, the ASX 200 received a late-afternoon lift following the news.
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Harvey Norman shares to pay boosted dividend
Harvey Norman is rewarding shareholders with a 20% higher interim dividend this year.
The ASX 200 consumer discretionary stock will pay investors 12 cents per share, fully franked, on 1 May.
The boosted dividend follows a 6.6% year-over-year increase in revenue to $2.29 billion, according to the 1H FY25 report.
The revenue bump contributed to a 22.9% lift in earnings before interest, taxes, depreciation and amortisation (EBITDA) to $581 million and a 41.2% increase in reported profit before tax (PBT) to $400 million.
The underlying PBT rose 2.2% to $311 million.
Commenting on the results, Chair Gerry Harvey said:
We have made significant strides in enhancing our digital, online, and in-store experiences, alongside the strategic expansion of our global store network and targeted investments in key segments.
What's the retail climate like?
The Australian Bureau of Statistics (ABS) released the retail trade report for February yesterday.
Australian retail turnover rose by 0.2% in February, according to seasonally adjusted figures.
However, spending on household goods fell 0.3% in February, compounding a 4.4% fall in January.
Robert Ewing, ABS head of business statistics, said:
Following promotion-based growth across the December quarter, spending on household goods continued to moderate with lower discretionary spending to begin the year.
As my colleague Laura explains, the ASX consumer discretionary sector typically benefits from falling interest rates.
Lower interest rates mean consumers have more disposable income to spend on discretionary goods such as furniture and electronics.
The RBA cut interest rates for the first time since November 2020 in February, and many economists expect more cuts this year.
Despite this positive economic situation, top broker Goldman Sachs worries that Harvey Norman may experience softer growth.
In a recent note, the broker said:
… we remain of the view that rising competition and a lagging presence in omni-channel as well as an older demographic skew may result in lagging growth in sales vs key industry peers.
Goldman Sachs has a sell rating on Harvey Norman shares with a 12-month price target of $4.30.
However, Bell Potter is bullish on Harvey Norman shares.
The broker has a buy rating and a 12-month share price target of $6.
Bell Potter analysts tip Harvey Norman to pay fully franked dividends of 25.4 cents per share in FY25 and 28.1 cents per share in FY26.
