Harvey Norman Pays $7.8 Million To Help Its Franchisee

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The role of the franchisees in between the big networks have come to the notice of the market players. Harvey Norman Holdings Limited (ASX: HVN) has been found to be helping one of the franchisees. The shareholders of Harvey Norman have managed to give away approximately $8 million as tactical support in the previous year in order to support its franchisee. As per FY 2018 results of Harvey Norman, the company had given $7.8 million in the June 2018 quarter. This help has been provided by the company primarily because of the restructuring process which needs to be carried out in its franchisee. This payment has been made to Mac1 which is the Apple reseller. Harvey Norman has also managed to pay the debts which were supposed to pay to the suppliers. Mac1 is also merged with “The School Locker”, which another franchisee of Harvey Norman, and now both the companies (Mac1 and The School Locker) would be competing with JB Hi Fi’s commercial division.

In FY 2018, the net profit after tax or NPAT of Harvey Norman witnessed the decline of 16.4% and stood at $375.38 million while in the previous year it amounted to $448.98 million. The company said that its franchisee sales witnessed an increase of 2.6% in FY 2018 and stood at $5.76 billion. Despite this, the company’s franchising operations division saw the decline of 7.2% and stood at $282.54 million. It reported that the margin of the same segment witnessed the decline from 5.42% to 4.90%. The primary factors which impacted the company’s FY 2018 results were the decline in regard to net property revaluation increment in respect of property portfolio to $51.65 million as well as the loss which the company encountered from Coomboona Holdings dairy joint venture. 

The management of the company reflected positive views for FY 2018 and stated that the company has witnessed strong momentum globally. Moving forward, the company would be working towards to improve the performance globally and it also plans to make significant deployments so that the company’s offshore store network witnesses strong growth with the special attention towards South East Asia. Overseas, the company believes that it could come up with fresh 18 company-operated stores and that too in the time span of 2 years. If the company managed to achieve this milestone, it would increase the stores to 107.

The restructuring of the Mac1 brings to the limelight that the Apple resellers have been struggling a lot within the contemporary market of Australia. It also reflects how inconsistent is Harvey Norman in regard to the franchisee’s treatment. The tech-resellers have been witnessing the negative impacts from the past few years. The robust expansion in regard to the brick-and-mortar stores of Apple throughout the country has wiped out the number of tech-resellers.

At the time of writing, Harvey Norman Holdings Limited has the price of A$3.360 which implies the intra-day decline of $0.070 or 2.041%. The company has the market capitalization of circa $3.82 billion.

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