HVN surged higher on Friday, with gains almost eclipsed yesterday as the retailer added another +8.6%. Upgrades poured through from the likes of UBS, Citi, and Jefferies, with the former lifting the stock from a Hold to a Buy. HVN was the final major retailer to report this earnings season, and it capped off a round of corporate results that generally reflected improving consumer sentiment despite ongoing financial pressures—share prices reacted accordingly.
HVN’s enthusiastic leader Gerry Harvey says the retailer is poised to capitalise on the AI boom, with more consumers expected to upgrade their tech in the year ahead. The company, which operates under the Harvey Norman, Domayne, and Joyce Mayne brands, delivered a strong outlook after reporting nearly 10% sales growth in July and continued momentum across its eight international markets. AI is seen as a key driver, bringing more foot traffic to its stores, both in Australia and overseas. Encouragingly for Gerry, same-store sales for Australian franchisees rose 6.4%, outpacing key competitor JB Hi-Fi.
Gerry Harvey wasn’t slow to point out that HVN’s business model includes property. Effectively, HVN is similar to Macdonald’s, which makes money from property as well as from flipping burgers – at the home of the golden arches, burgers drive revenue, but property drives profits. As of June 30, HVN’s total assets surpassed $8 billion for the first time, underpinned by $4.53 billion in freehold property, very impressive for a company with a market cap of $9.3bn – roughly 15% of their annual profit comes from property revaluations. HVN is trading at a very rich valuation compared to recent years, but supported by a 3.8% fully franked yield and a business engine that is performing nicely, we classify ourselves as “buyers of dips.”
- We can see HVN consolidating recent explosive gains, with the risk/reward looking attractive on dips back towards $7.
MM is bullish towards HVN
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