Gerry very gloomy

November 24, 2010: Last year, in the same week in November, Harvey Norman boss Gerry Harvey predicted Christmas sales for his stores were going to be ‘an absolute record’. This week, he told shareholders and media he was expecting one of the worst years on record.

‘There are lots of retailers out there at the moment who are scared shitless – because it’s a very scary time,’ he observed.

‘Lots of our stores are making no money or losing money and other stores are making money, but when you put it all together it hasn’t been this bad for a long, long time.’

He predicted that over the next 3 to 12 months, there would be a large number of retailers closing their doors. He said there would be some household names among them, but that most damage would be done to smaller retailers unable to compete with large competitors.

‘When Harvey Norman gets damaged there are other people being really damaged. I can’t see how they won’t go to the wall.’

He identified the publicity around the Melbourne Cup interest rate hike, price deflation, squeezed margins and the not-unrelated boom in online sales by overseas, GST-free retailers as the main causes of the current soft market in retail, and slammed the Federal government for putting local retailers at an ‘unfair disadvantage’ in competing against goods bought from overseas websites.

‘The fact that people say… it is too hard – that is bullshit”, he said at the annual general meeting on Tuesday.

‘Other countries do it. We can do it.’

‘We have spoken to a number of politicians and their answer is “it’s too hard”,’ he said. ‘”It is too much to collect. We’ll upset the voters because they vote for us”.

‘You are going to forgo about $1 billion in one year in tax, that is the GST they are going to lose in one year because this thing has escalated because of the parity.’

The Australian dollar has appreciated over 15 percent against the US dollar since the start of the financial year.

Harvey said offshore, online sales were exploding: ‘If you think its a big problem now have a look at it down the track…and see if the government can then say it’s not a problem.’ (He exampled women’s shoes, handbags, etc, as a hard-hit retail segment, saying Harvey Norman itself hasn’t been significantly impacted. Well, he is a major shareholder – Ed.)

John Hughes, CEO of Thorn (Radio Rentals, Rentlo) speaking on the ABC’s Lateline Business program last night after announcing a good profit result driven by its consumer and small business rental business, identified another drag on retail sales – underemployment.

He said that if part-time workers were factored into the employment statistics there was ‘close to, if not above 10 percent’ of the population who were struggling.

‘If you are working 10 or 12 hours a week you are still employed, but you can’t put food on the table,’ he said.

He also identified the interest rate hike as an issue, especially among the Gen Y demographic ‘who don’t know how to spell the word “save”,’ noting that this group represented 21 percent of the population and 44 percent of the workforce.

‘These people drive the growth of retailers like JB HiFi’ he said.

Thorn announced it was quitting its involvement in its BigBrownBox.com.au online retail venture so it could allocate resources to other opportunities.

‘[Retailing] is not going to get to much better over the next year or two,’ he predicted.

He singled out camera retailers as finding it ‘very, very tough versus the pricing people can purchase overseas’

Responding to recent calls for a change to the GST threshold, a spokesperson for Assistant Treasurer Bill Shorten indicated that the government might re-visit the issue, but this morning Shorten himself hosed down speculation.

‘It’s not clear at this stage what to do,’ Shorten said. ‘We’ll have to work something out and assess if it is administratively feasible.

‘It’s only at that stage. It’s not clear at this stage what to do,” Shorten told ABC News Breakfast.

‘We’ll have to work something out and assess if it is administratively feasible.’

COMMENT: Lower GST on online sales will become suddenly and inexplicably ‘the right thing to do for the Australian economy’ only if and when Woolworths and Coles decide its what they want. Gerry Harvey certainly knows how to use his voice, but has nowhere near the political influence of this too-powerful duopoly.