Gerry Harvey opened his first store in 1961 and today there are some 250 Harvey Norman stores worldwide. Over the past year, however, Harvey Norman has closed stores, seen others fall into liquidation, and a multi-million dollar development due to house the Harvey Norman homemaker centres has been left vacant.
As reported on Friday, two wholly owned Harvey Norman subsidiaries in Western Australia and one in Victoria have gone into liquidation; four Clive Peters and three Rick Hart outlets were shut down in the September quarter. Falling sales, a high Australian dollar and intense competition are just some explanations for the sudden closure.
Citigroup downgraded Harvey Norman from a buy to neutral due to a 3.8% fall in first-quarter sales, falling margins, weak offshore sales and earnings outlook. Dividend estimates have been lowered.
Harvey Norman shares have sunk by 35% over the last year, and some 50% from two years ago. Harvey Norman’s homemaker centres face fierce competition from the likes of Wesfarmer’s Bunnings, Woolworth’s recently launched Masters, as well as global success story Ikea. Commonwealth Bank equities analysts noted that all parts of the company’s global network are weak – with these pressures unlikely to ease until at least calendar year 2012.
Another stock that’s getting beaten around by the high Australian dollar is global winemaker Treasury Wine Estates. Citi notes that Treasury Wine Estates is one of the most AUD sensitive stocks on the ASX, and so places a high risk sell on the stock. Regardless of its lacklustre earnings, the share price has been on a steady advance, rising 15% over the last month. Citi speculates that M&A appeal is elevating the share price above its valuation. The broker has a target price of $2.90.
Aquila Resources is on the sell list of RBS Australia, which has downgraded it from a previous hold. The target price has dropped from $5.23 to $5.12. RBS is concerned about Aquila’s ability to raise cash to meet its development projects; an upcoming equity raising may also weaken the share price. Nevertheless there are some investors out there backing the miner as its shares have spiked by some 15% over the past month (note: the shares are down 29% over 6 months).
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