Originally Published: 7 August 2012

Following yesterday’s grim sales results released by Harvey Norman, the chairman of the Australian retail chain, Gerry Harvey, has hinted that the company may be forced to close several former Rick Hart stores under its ownership.

Speaking to The West Australian, Harvey said that although some of the former Rick Hart-branded stores were performing well, the underperforming shopfronts could well be excised from the greater Harvey Norman network in the future.

“There’s certainly some of them that are fine,” he said. “The worst ones are gone but that doesn’t mean there’s another one, two, three that have got to go some time in the future.

“It’s just a simple case if the store loses too much money there’s no point.”

Harvey Norman purchased 21 Clive Peeters stores and 8 Rick Hart-branded stores in 2010. However, sales revenue from the stores was “below management expectations” and the brands were considered “damaged”, and in 2011 the company announced that it would close or rebrand the acquired stores.

As a result, 4 Clive Peeters stores were closed and 17 were rebranded to Harvey Norman or Joyce Mayne shopfronts, while 3 Rick Hart stores were closed in August 2011 and the remaining 5 were rebranded to Harvey Norman.

Speaking about the acquisition, Harvey told The West Australian, “We should have never have taken over that business. In every state it’s been proven to be the wrong decision.”

But it is not just a few select stores that are causing problems for the retailer.

In sales figures released yesterday, Harvey Norman announced a decline in sales of 7 per cent across the company’s global network of stores. However, more worrying was the company’s profit forecast for the 2011-12 financial year, with chief financial officer Chris Mentis saying the company could shed almost $150 million compared to last year.

“Unaudited preliminary accounts for the year ended 30 June 2012 indicate profit before tax and minority interests for the consolidated entity of $227.6 million compared to $373.9 million for the year ended 30 June 2011, a reduction of 39.1 per cent ($146.3 million),” Mentis wrote in the results release.

According to Harvey, the retail industry as a whole is in a huge state of flux.

“This is a shake-out of the appliance and retail industry that’s occurring at the moment,” he said. “There are going to be a lot of casualties.

“There’ll be a contraction in shop numbers I would have thought of at least 10 per cent.”