Stock watchers have predicted for months that Harvey Norman would be forced to face up to a spending slowdown,despite shoppers remaining exuberant for much longer than expected in an environment of sustained interest rate rises. Harvey Normanreported a 15.1 per cent slide in half-year net profits in February,blaming a cooler summer which had hurt sales of big-ticket items such as air-conditioners.
Now retail experts and analysts view Harvey Norman’s woes as just one piece of a bigger puzzle the entire retail sector faces,with consumers no longer able to ignore the financial pain of 12 successive rate rises.
“We remain of the view consumer spending will be challenging over the next 12 to 18 months,” E&P Financial retail analyst Philip Kimber said on Wednesday.
“In particular for those segments that materially benefited through the COVID period[and thus are coming off an] abnormally high base.”
E&P said in a note to clients that based on Harvey Norman’s market disclosure,it appeared the company was on track for second-half net profits to fall by up to 50 per cent compared with last year.
Investment bank UBS is also cautious about the outlook,having downgraded a number of the companies it follows last week. Its team has a “sell” rating on Harvey Norman,footwear seller Accent Group and Rebel owner Super Retail Group,while it has dropped earnings expectations for fashion jewellery chain Lovisa and Universal Store.
“This slowdown[in spending] started in big-ticket retail in early calendar year 2023 and has now broadened,” analyst Shaun Cousins said in a note to clients.