Why Harvey Norman’s Share Price Dropped by 1.92%

The share price of retail giant Harvey Norman [ASX:HVN] has been plummeting fast over the last 24 hours, and was down by 1.92% just after lunchtime.

It’s been a trying couple of years for Australian retail, and dropping share prices across the industry are hardly a surprise. Fellow retail titan Myer reported weak sales last quarter, and its share price has fallen by nearly 1.78% at time of writing.

But Harvey Norman’s drop is a particularly painful slap in the face for billionaire retailer Gerry Harvey who told us in February, ‘if the share price goes down to $4 then sell your house.

It closed last week at $3.65, and was down to $3.58 just after 1:00pm AEST today.

What’s the Story?

Harvey’s words in February were prompted by a 14% plunge in one trading day — their biggest drop in 30 years. A $20 million write-down at Harvey Norman’s Coomboona dairy farm joint venture had clearly frightened prospective investors.

Determined to convince the market that the drop was merely an overreaction, Harvey encouraged to buy the stock while it was sitting so cheap.

But the Coomboona debacle has continued to spiral out of control. The dairy farm has been tipped into administration, and Harvey Norman has revealed that it’s owed $37.9 million, now fully assumed to NAB.

The Australian Financial Review has said, ‘for the tally, that’s a total debt accrued by Harvey Norman of $73.15 million.’ Shareholders have been shouldering 100% of that debt. Up to $7.8 million is still owed to creditors.

Recent results imply the retail company is running at an annual (implied) loss of $18.12 million a year.

How Will Harvey Norman Recover?

Judging from Gerry Harvey’s comments earlier in the year, Harvey Norman certainly has an eternal optimist at the helm. But the consensus is almost unanimous: the retail giant’s risky ventures have taken their toll.

How the company will move forward from this is still unclear. It doesn’t look good.


Ryan Dinse,
For Markets & Money

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Ryan Dinse is an analyst at Markets and Money. He has two decades of experience in financial planning, equity analysis and credit markets. Ryan combines fundamental, technical and economic analysis to identify and invest in good ideas at the appropriate stage of the economic cycle. He has a strong interest in technology, economic history and disruptive business models. His focus at the moment is as lead analyst on two of our most recent and innovative investor services, Crash Market Investor and Sam Volkering’s Secret Crypto Network. He will write about the exciting opportunities for investors to benefit from significant changes in world markets. He is a member of Fintech Australia, a former member of the Digital Currency Council, and is a fully accredited financial adviser.

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