Has there been a major power struggle inside Harvey Norman? Bill Eclairs explains.

With trading for 2005 about to start, spare a thought for Gerry Harvey, the driving force behind Harvey Norman. For whatever reason the oomph has gone from Harvey Norman’s share price in recent times.

Compared to his more diversified and larger competitors, Woolworths and Coles Myer, Gerry Harvey’s company spent 2004 going nowhere. Its share price finishing the year at $3.15, up from the lows of $2.66 in February, but well down on the most recent high of $3.40 in October 2003.

In contrast Coles and Woolies share price have powered away. Coles is up around $2.40 a share on its 2004 close of $9.86 and Woolies is up around $3.50 a share finishing 2004 on Friday at $15.01.

Gerry’s company sells all those bright and shiny gizmos that everyone just wants. Widescreen TVs, DVDs of all manifestations, LCDs, mobile phones, computers, iPods. All strong selling lines that should have been generating him lots of money.

In contrast Coles Myer has the underperforming Megamart business that competes against Harvey Norman, while Woolies’ Dick Smith and Tandy business is doing better than Gerry in sales growth.

But Dick Smith is still a smaller business than Harvey Norman which is now spread across the Harvey Norman and Domayne businesses in Australia, plus a smaller international operation. These generate earnings through a combination of franchising fees and charges and property income.

Harvey Norman’s own retail businesses are offshore, concentrated in New Zealand, Singapore, Slovenia and Ireland.

Now there’s news in the trade press of a senior management reshuffle inside Harvey Norman that has seen a long time executive put in charge of the overseas businesses, while the company ponders a change in direction in the marketing of its consumer tech products.

The story is in the December issue of Digital Connect News but it is not to be found on the website, just in the analogue issue of the electronic magazine.

It says Stephen Hauville, Harvey Norman’s General Manager of Consumer Electronics and a director of the company, has been switched to overseeing the international stores.

Crikey mentioned Hauville back in our exclusive report on the ACCC’s fight with Gerry Harvey in the middle of last year.

From that story it was clear hauville is a senior insider of Harvey Norman and one of Gerry Harvey’s key executives.

DCN said Hauville had “been moved from running a national consumer electronics operation in Australia of 179 stores to being responsible for Harvey Norman’s international operations of 21 stores in New Zealand, two in Ireland, one in Slovenia and 11 in Singapore”.

The reason given by John Skippen, Harvey Norman’s chief finance officer was that the company wanted to replicate its Australian concentration on consumer electronics in its overseas stores.

But DCN said the move also comes as the company wonders about whether it should be merging its consumer home entertainment products business with its IT computing businesses, following the trend towards convergence that’s emerged with so-called media centres and similar products. They are both an IT, computer based product, but with enormous home entertainment capabilities.

DCN claimed there was internal “bickering” at Harvey Norman over which division will be handling convergence products. The magazine said a decision will be made shortly by John Slack-Smith a director of the company and the head of the IT products businesses. That would indicate that the consumer area has lost out, hence the move by Stephen Hauville to the international businesses, which are much smaller than what he was running previously, but have the virtue of being wholly controlled by the parent company.

John Skippen said Hauville was moving because his skills were needed in the overseas businesses. “We are expanding overseas” is how DCN quoted Slack-Smith.

Gerry Harvey has said that his company’s sales rose 21.3% in the first 20 days of November and was looking for this sort of growth for all of that month and December. Impressive as that it is, it is not helping push Harvey Norman shares to new records, like those of its bigger competitors.

Gerry Harvey has often traded Coles Myer shares, buying low and selling high. But the performance in 2004 should have seen him hanging on as Coles Myer rebounded strongly. He likes John Fletcher and his story, while he’s also an admirer of Roger Corbett at Woolworths.

But compared to their 2004s, Harvey Norman has all but stood still. Why is the question. Is the move by long time senior executive Stephen Hauville a sign of a new strategy, or a recognition of an internal power struggle and switch in approach to a new product area?

Peter Fray

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