Teresa Ooi | November 26, 2008
RETAILER Gerry Harvey is planning to close stores as the economic slowdown erodes margins.
Gerry Harvey said he had been forced to close two Harvey Norman stores and more would follow.
Mr Harvey said he had been forced to close two Harvey Norman stores and more were scheduled after pre-tax profit fell by 32 per cent in the three months to September.
He was not prepared to predict sales figures for October, November and December.
"What happens next year between January and June is anybody's guess but many struggling independent retailers will go under," he said.
Mr Harvey supports the Government's $10.4 billion fiscal stimulus package and believes the Government is "probably doing a pretty good job".
"I'm glad it's them and not me, but then I wish it was someone else running Harvey Norman and not me," he said.
Foot traffic was down between 10 per cent and 15 per cent and sales fell 3.1 per cent for the 28 days ending on November 23.
"When Brashes (music chain) went under, we got a kick-start and took some of their better staff," he said at the company's annual meeting yesterday.
"Our market share has increased but our margins, especially in electronics, computers, cameras and plasma televisions have never been so low. It's a pretty difficult position and in my 47 years in business, I have never seen our margins hit so badly."
He said there were some encouraging signs for retailers with interest rates falling, unemployment just over 4 per cent and price of fuel coming down.
"There's a fear campaign," he said.
"People have to spend -- if not, we will suffer. If we could turn up the confidence tap and the money could flow properly through the banks, then this problem would be over in a flash. We don't have any great problem in Australia, we don't have big bad debts, all the fundamentals are OK.
"This thing is an American contagious disease that we've all got. It's the manipulation of money that has gone out of control."
He praised the Reserve Bank for cutting interest rates by 2 per cent since September and was expecting more rate cuts.
"I wouldn't be surprised to see interest rates around 2 to 3 per cent or possibly lower," he said.
But he disagreed with suggestions that the goods and services tax should be cut to stimulate growth.
"GST -- I hate it, but it's a very fair tax as opposed to a lot of very unfair taxes," Mr Harvey said.
"It would not be in the country's long-term interest to cut GST." He said the Ireland operation was a "catastrophe" and it had been a bad mistake to open stores there.
"If that situation was in Australia, Harvey Norman would go broke. Ireland is a real worry.
"Singapore sales are good, Malaysia sales are also good, not great. New Zealand, like Australia is also not bad."
Shares fell 20c to $2.24.