Investors must be getting desperate if they mark up Harvey Norman shares by 5c, as they did Wednesday (to $2.63, still the lowest level since August 2003) when sales growth is slowing. Harvey Norman shares are down around 20% from the high last November of $3.25.

Harvey Norman reported yesterday that sales for the nine months had risen 11%, with comparable store sales up 5.1%. By most comparisons, that’s a pretty good result from all the 188 franchised stores in Australia and the company-owned stores in New Zealand, Singapore, Ireland and Slovenia.

But compared with sales figures for the half year to December , sales growth has slowed noticeably. They were up 12.5% with comparable sales up 6.2%. Harvey Norman doesn’t provide actual dollar sales figures for the quarter (as do Coles and Woolies) and compare them to the previous corresponding quarter. They merely give three months, six months, nine months and then the year figures, and the percentage increase for both topline and same store sales.

But it is clear sales growth is slowing. To work out actual quarter figures and comparisons is tough, especially to get a handle on same store or comparable sales growth in the quarter. Sales in the third quarter rose from the $2.10 billion at the end of December to $3.03 billion at March 31, an increase of $903 million. But that’s meaningless without comparable figures for the third quarter last year, and impossible to work out same store growth. First quarter sales were up 12.8% and same store sales were up 6.0%, so the growth is noticeably slower.

Harvey Norman did blame a cool summer and early autumn but added that franchises report “increased sales growth due to their leadership in the convergent technology market.” Well they would say that, especially as Harvey Norman has thrown its lot in with the convergence camp (TVs becoming home computers, and home computers becoming TVs and media centres).

A better idea of the market will come next Tuesday when Woolworths releases third quarter sales figures for all its businesses, especially the Dick Smith and Tandy s chains which have been taking sales and margin off Harvey Norman in this area.

Peter Fray

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