Gerry Harvey has unloaded on the politically correct obsession with boardroom gender quotas, saying struggling department store rivals Myer and David Jones score top marks for corporate governance “but we beat the sh*t out of them”.
The billionaire founder of Harvey Norman, which on Friday reported a 7.2 per cent lift in full-year profit to $402.3 million despite falling Australian franchisee sales, said the market was “very flat” but David Jones’ South African owners were “wrong” to controversially declare the country was in a “retail recession”.
The comments earlier this month by Woolworths Holdings were met with scorn from JB Hi-Fi boss Richard Murray, who countered that department stores were “struggling for relevance” — and now Mr Harvey has weighed in with his own assessment.
He argued David Jones would today be a “great retailer” if had he purchased the company 20 years ago for his wife and current Harvey Norman boss Katie Page, and its woes were a result of decades of revolving-door CEOs and board members most of whom “have never sold a sock”.
“Myer and David Jones are two big department stores that are getting smaller and smaller every year,” Mr Harvey said. “Then you look at what’s happened to department stores in some other countries that are trading quite well. Look at the ownership and management of those companies — why are they doing well and the Australian ones don’t?”
Mr Harvey, who owns 55 per cent of the company’s shares, hit out at activists “pushing an agenda” like the Australian Shareholders Association. The ASA led a first strike against the Harvey Norman board at last year’s annual meeting after questioning the company’s strategy and diversity of its board members, setting up a potential spill at this year’s meeting.
“We’re criticised for not having enough women on the board, not having enough independent directors,” he said. “There are lots of things they criticise us for, but the reality is over the years, the (companies) we’re talking about got much better marks for corporate governance and all those sorts of things — they’re regarded as very good, we’re regarded as very bad, but then we beat the sh*t out of them.”
Board members at David Jones and Myer “in most cases are not retailers at all”, Mr Harvey said. “Three women, five blokes, most independent, only one that’s not (is) the CEO and he gets the sack,” Mr Harvey said. “Holy sh*t, and that’s a good model? For someone like me looking at that, being told that’s the model I should follow, are these people mad?”
He said there was “absolutely no sense” in it but “they’re out there as a collective mob pushing this agenda that’s wrong”. “I’m constantly getting letters from superannuation funds, proxy advisers, the Australian Shareholders Association, all sorts of people all the time telling me I’ve got a problem,” he said.
“They’ve (the other retailers) got the problem, not me. Why are they pushing this line? What is this motive? They don’t give up, keep pushing the line, it’s obviously all bulls**t. We’re punished, they’re not. They’re regarded by the super funds as the place to invest because they tick the boxes.”
‘NO BOOST FROM TAX CUTS’
A weak local result for the homewares and electronics retailer was cushioned by its successful overseas operations, which Mr Harvey ultimately wants to generate half of the company’s profit, from about one quarter currently.
Total sales were up 12.1 per cent to $2.23 billion, largely thanks to its 90 company-operated offshore stores breaking through the $2 billion sales barrier for the first time with a 9.7 per cent increase to $2.05 billion.
The 11.7 per cent rise in Harvey Norman’s overseas profitability to $129.70 million offset a 2.3 per cent decline in revenue received from the company’s 195 franchised Australian complexes.
Revenue from local franchisees was $944 million for the year, with total franchisee sales down by 1.8 per cent to $5.66 billion amid a housing market downturn. The second half was particularly tough, with fourth-quarter aggregate comparable sales for franchisees dropping by 1.6 per cent for a full-year comparables sales decline of 0.9 per cent.
Harvey Norman announced a $173.49 million capital raising to manage debt but still increased its final dividend by 3 cents to a fully franked 21 cents. Shares in the company dropped by 1.82 per cent to $4.585 by just after midday, still 25 per cent higher than $3.66 a year ago.
The company has begun replicating its successful overseas premium store format in Australia and New Zealand, with a refit underway at the company’s Cairns franchised complex, while refits at franchised complexes at Campbelltown, Balgowlah, Preston and Aspley will start post-Christmas.
Harvey Norman intends to grow its international footprint with up to 21 new stores overseas within the next two years, including 17 alone in Singapore and Malaysia. Overseas revenue has now increased by 48 per cent over the last five years and profitability has nearly quadrupled.
Despite the current weak environment, Mr Harvey stressed Harvey Norman had made $2.6 billion profit over the past five years. “If I told you I was unhappy with that you’d want to know where I was being certified,” he said. “We’re one of the most successful retailers in Australian history.”
Harvey Norman said local franchisees had nonetheless continued to invest in their operations in anticipation of Federal Government tax cuts, stabilising house prices and an increase in lending by banks for mortgages and small business loans.
But Mr Harvey was lukewarm on the tax cuts so far, saying he hadn’t seen a big impact. “I don’t know, all the feedback is no. We thought it’d be a bit like a stimulus,” he said, adding that sales in July and August were higher than this time last year.
“I expected our sales to be flat, but they’re actually better than I thought they might be. If they had been flat I wouldn’t have been surprised because just getting last year’s figures is hard enough in this environment.”
Asked if the Government needed to do more to stimulate the economy, Mr Harvey said “there’s an argument that they should and another argument that they shouldn’t”.
“We haven’t had a recession for 30 years, there’s an argument that a recession wouldn’t necessarily be all that bad in some ways. I don’t want a recession, I’m just saying economies over the years seem to be able to survive only on the basis of booms and busts,” he said.
“Low interest rates are not particularly working, now they’re talking about quantitative easing. Where is it all going? We haven’t got a recession, we’ve got an economy that’s a bit flat, and we’ve got a whole heap of people that don’t know how to fix it.”
— with AAP