Harvey Norman Earnings: Another Difficult Year Ahead, but Earnings Growth To Return

No-moat Harvey Norman’s fiscal 2023 underlying profit of AUD 680 million—before tax and excluding net property valuations—was marginally better than the AUD 670 million midpoint of the guidance range from late June 2023. Although global sales and operating profits in fiscal 2023 broadly met our expectations, soft trading in July 2023 drives our near-term earnings downgrade. Second-half fiscal 2023 sales declined 12% in the core Australian franchising operations versus the previous corresponding period. In July 2023, Australian franchisees saw weak demand for electronics and home appliances with demand normalising after the coronavirus pandemic, exacerbated by cost-of-living pressures. We reduce our fiscal 2024 EPS estimate by 6% to AUD 0.33 per share.