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Harvey Norman Holdings, Australia's largest furniture and electronics retailer, fell the most in more than 20 years in Sydney trading after first-quarter earnings dropped 32 per cent.
Harvey Norman shares slumped as much as 31c, or 13 per cent, to A$2.13, the biggest intraday fall since October 1987, during trading yesterday in Sydney. They closed at A$2.24, down 20c or 8.2 per cent.
Executive chairman Gerry Harvey, whose 30 per cent stake lost A$60 million of value at one stage yesterday, is struggling to revive sales growth as profit margins are crimped by falling demand and a slumping Australian dollar that makes imported electronics more expensive.
The retailer is slowing hiring and cutting advertising to lower costs at its 260 outlets in six countries selling Sony flat-panel televisions, Apple iPods and Microsoft Xbox game consoles.
"The recent period reflects the continuation of a post-Olympic games hangover and very poor consumer sentiment," said Craig Woolford, an analyst at Citigroup in Sydney, who rates the stock "buy".
"The implied run-rate is below our first-half profit before tax forecast, implying significant margin pressures leading into the key Christmas trading period," Woolford said in a note to clients.
Earnings fell to A$71 million in the three months ended September 30 from A$104 million a year earlier.
Sales for the 28 days ended November 23 fell 3.1 per cent compared with a year earlier. Profit margins remain "under pressure", the retailer said yesterday. Gerry Harvey expects the lower sales and earnings to continue for the rest of the half.
"We've ended the first quarter with things getting progressively worse and now we're down over 30 per cent," the 69-year-old said in Sydney. "If you want me to give you my best guess, I'd say it's over 30 per cent down until the end of Christmas and who knows what's going to happen next year."
The value of Gerry Harvey's stake has fallen by two-thirds this year, falling to A$717 million on yesterday's prices from A$2.2 billion in January. He was ranked Australia's 18th richest man with A$1.6 billion in BRW Magazine's annual rich list, published in May.
The retailer may scale back plans to open another 15 stores by July as Irish stores lose money and Australian sales fall, Harvey said in a September 30 interview.
- BLOOMBERG
