A ‘Shocker’ Down Under
Harvey Norman (HVN.ASX) is a medium sized retailer and franchisor based in Australia that generated ~$6.43b in sales for the (June) 2022 year, putting it about the same size as Staples (pvt) in the US, and sells computers, furniture, and other CE products. The company has 739 franchised stores and complexes in Australia and additional stores in New Zealand, Singapore, Slovenia, Ireland, Malaysia, and Croatia. Harvey Norma closed the 6/22 year with a net debt to equity ratio of 10.3%, up from 7.4% in 2021 but down from 19.4% in fiscal 2019, so this is not an over-leveraged company, but after a ‘good’ Black Friday, one franchisee was shocked to receive a notice that forbid franchisees from ordering new stock, indicating that the company was significantly overstocked heading into the holiday season.
Suppliers, who had been expecting to offer discounts on stock they wanted to move out during the holiday, are now offering even steeper discounts to other retailers given the situation at Harvey Norman, after receiving a similar letter from management, and some franchisees have indicated that November was a ‘shocker’ as to revenue for the month overall, with the expression typically used in Australia to describe a particularly bad game of rugby or soccer. We take that to mean that November sales dropped off very quickly, leaving the company committee that determines the company’s range of products to halt new purchases.
Contacts in Australia have noted that the Harvey Norman ordering system lacks a central buying process, leaving sourcing to individual franchisees who must operate under the committee’s guidelines, but no matter what the system, it seems that November put the fear of God into the minds of committee members, which has now been passed on to franchisees, and finally to their suppliers. This is a single datapoint in the vast CE supply chain but indicates how quickly things change and how those changes are carried down the supply chain. We don’t make the implication that this is happening to other retailers in Australia or other countries, but it certainly does little to set a positive tone for the remaining holiday season.
Suppliers, who had been expecting to offer discounts on stock they wanted to move out during the holiday, are now offering even steeper discounts to other retailers given the situation at Harvey Norman, after receiving a similar letter from management, and some franchisees have indicated that November was a ‘shocker’ as to revenue for the month overall, with the expression typically used in Australia to describe a particularly bad game of rugby or soccer. We take that to mean that November sales dropped off very quickly, leaving the company committee that determines the company’s range of products to halt new purchases.
Contacts in Australia have noted that the Harvey Norman ordering system lacks a central buying process, leaving sourcing to individual franchisees who must operate under the committee’s guidelines, but no matter what the system, it seems that November put the fear of God into the minds of committee members, which has now been passed on to franchisees, and finally to their suppliers. This is a single datapoint in the vast CE supply chain but indicates how quickly things change and how those changes are carried down the supply chain. We don’t make the implication that this is happening to other retailers in Australia or other countries, but it certainly does little to set a positive tone for the remaining holiday season.
RSS Feed