Harvey Norman

Topics: Balance sheet, Retailing, Asset Pages: 14 (4195 words) Published: January 21, 2011
The purpose of this report is to provide an industry and company analysis for Harvey Norman Limited (HVN). The research has been conducted by the GroupFiveAnalysts to assist interested parties in making investment decisions. Each member of the analysts’ team has dedicated to the group work, ensuring that the report is written to a predetermined specification, comprehensively researched, analysed and compiled. To gain the sufficient knowledge and expertise in the area, various information sources were thoroughly assessed, such as HVN’s financial reports, periodical and financial press publications, analytical reviews and governing bodies’ releases, together with a set of standardized financial statements attached in Appendix 1, offering our investors a financial comparison to other similar companies in the same industry. Industry Analysis

i) Main products
Harvey Norman is a multi-sector business with geographically dispersed operations (see Tables 1, 2 in Appendix 2). A summary of company’s products and activities within different industrial sectors has been provided in Figure 1:

Majority of its activities and products remain within the retail sector umbrella while other activities accommodate and complement the company’s strategy. Within retail, HVN offers quality branded products at competitive prices, targeting mass consumers. These products are substitutable discretionary goods with different lifecycle maturation, and consequently, different level of consumer demand and consumption. ii) Future prospects for the retailing industry

The main factors affecting the retail industry are the real household disposable income, consumer price index, the level of consumer confidence, interest rates and employment. Next year is expected to be the worst in decades for Australian retail trade industry due to rising unemployment rates and continuing negative consumer sentiment. Benefits of stimulus were short-lived and in the absence of further fiscal or monetary incentives, the consumers’ capacity remains limited. Retail trade accounts for 35% of total household spending, so real growth in retail turnover expected to be negative through 2009-2010, as illustrated in Figure 2. Figure 2: – Retail industry and economic cycle

Domestic retailers, that have previously dominated the Australian retail environment, will face more competition from foreign retailers that are entering the market. At the same time, Australian brand expansion to overseas Plaseems to be unrealistic for a couple of years, given the current economic downturn. However, the retailing industry is still expecting a boom over the long run. A detailed summary of industry prospects has been included in Appendix 3. iii) Competitive positioning

According to Credit Suisse analysts, within the industry as a whole (across all retail trade segments), Harvey Norman is placed second, before David Jones and after JB Hi-Fi, as presented in Figure 3. Figure 3 – Australian retail sector ratings

However, given HVN’s multi-sector business, it will be more accurate to recognize the major players within each separate segment as it has been presented in Appendix 4: assessing in detail the company’s competitive positioning within different industrial fields and different business lines, highlighting whether it is a major player, identifying its direct competitors and informing on the approximate market size and its market share in it. Company and Accounting Analysis

i) Brief Company History
Gerry Harvey, the chairman of the retail chain Harvery Norman. He and his business parterns, Ian Norman started out in 1961 to establish the Norman Ross chain of stores which, by 1982, totalled 42 throughout New South Wales, and Queensland. During the next five years, Gerry expanded the business to total 14 stores across New South Wales. The company floated in 1987 and it went public in the same year. HVN attributes its outstanding performance over the past 27 years to a...
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