Retail: Harvey Norman Joins The Restructuring Push

The restructuring of Australian retailing continues.

Electrical retailer Harvey Norman yesterday joined rival JB Hi-Fi, Colorado, Borders/Angus and Robertson and the Premier Retail group of chains in restructuring operations to meet the challenge of weak sales, cautious consumers who are saving madly and the strong Australian dollar.

The company said in its long delayed 2011 sales update, that it was closing the Clive Peeters and Rick Hart chains due to falling sales and losses.

Some of the stores would be shut, others would be rebranded.

JB Hi-Fi is in the process of closing its underperforming Clive Anthonys chain of outlets: some will be rebranded, others will be closed.

Premier revealed that around 50 stores across its various chains face closure, especially if rents aren't cut by landlords. Other stores will open in the next couple of years in two of its chains and Premier Retail will be playing hardball with landlords to cut costs.

And 140 stores are being closed in the Colorado group, with losses concentrated in the Colorado chain (100 stores). 40 others in allied chains in the collapsed retailer in Australia and New Zealand are closing and Red Group, owners of Borders and Angus and Robertson, closed all Borders outlets and sold or closed the A&R outlets.

Harvey Norman's decision came 13 months after the company paid $55 million to the receiver managers of Clive Peeters in July of last year, for most of the stores in the failed chain, a move chairman Gerry Harvey said yesterday was a "mistake".

While Harvey Norman lifted global sales by 1.7% in the year to June to $6.18 billion, like-for-like (same store or comparable store sales) fell 3.6% over the year.

"Global sales were negatively affected by currency depreciation, including a 3.8 per cent fall in the New Zealand dollar, a 12.3 per cent slump in the euro and a 10.0 per cent deterioration in the UK pound," the company said.

Despite the news of the cutbacks and the weak sales figures, Harvey Norman shares jumped 16c yesterday, or 8.9%, to $1.95, after hitting multi-year low of $1.765 on Tuesday.

Harvey Norman said in the statement:

"The Clive Peeters and Rick Hart brand formats have not achieved the requirement for ongoing investment by the Company.

"Given this, 16 of the 25 Clive Peeters and Rick Hart stores will be converted to Harvey Norman complexes, 2 will be converted to Joyce Mayne complexes, 4 Clive Peeters stores will be closed and 3 Rick Hart stores will be closed.

"The closure of the 4 Clive Peeters and 3 Rick Hart stores will result in a charge against the pre-tax profit of the consolidated entity of an amount presently estimated to be approximately $10M in respect of the financial year ending 30 June 2012."

Total sales in Australia, the company's biggest market, rose by 3.3%, but like for like sales in Australia fell by 2.8%.

Elsewhere total sales and like for like sales rose at Harvey Norman stores in Slovenia and Northern Ireland, but fell in Ireland and New Zealand.

The company said that in 2010-11 "Furniture and bedding franchisees continue to grow revenue and market share despite continued slowdown in the industry".

"We expect that our brands will again outperform the market in FY12.

"Electrical franchisees are operating in an extremely challenging environment accentuated by the strength of the Australian dollar.

"Price deflation in the television category has continued and has resulted in reduced revenues, however transactions continue to grow.

"The franchisees' continued focus on white goods, cooking, home appliances and floor care has resulted in growth in these categories.

"Deflation will continue to dampen revenue growth in the coming year.

"Computer franchisee sales continue to be affected by a cautious consumer and intense competition, however "Tablets", "Smart Phones", "Ultrabooks", "All in One Computers" and new generation DSLR cameras will offer positive opportunities for growth in the year ahead.

"Harvey Norman franchisees are well positioned to continue to lead and maximise the opportunities in this market," Harvey Norman said.

And elsewhere in retailing Myer has renewed chief executive Bernie Brookes' contract to extend his term to August 2014.

The company said it had increased Mr Brookes fixed salary by 5.3% to $1.8 million a year.

That's despite the share price falling sharply (excluding the recent slumps) from the float in late 2009.