THE ECONOMIC downturn and falling property market are extracting a heavy toll on electrical and furniture retailer Harvey Norman, whose struggling Irish unit incurred losses of more than €1.24 million per month in the first half of the year.
The Australian-owned firm, which operates 13 outlets in the Republic, has told the stock market in Sydney that the performance of its Irish stores deteriorated in the six months to June and lost a total of 12.77 million Australian dollars (€7.47 million) in that period.
Such losses appear to have been partially offset by profits in the July to December period, the first half of Harvey Norman's fiscal year, as the retailer's losses in Ireland for the 12 months to June amounted to Aus$9.52 million (€5.56 million).
The company's Irish business - Harvey Norman Holdings (Ireland) - had an operating profit of €1.66 million in the previous fiscal year, according to filings in the Companies Registration Office.
Harvey Norman attributed the reversal in the fortunes of its Irish business this year to difficulties in the "UK retail market [ sic] and the sharp downturn of the Irish property sector, increasing inflation and a lack of confidence in the Irish economy", which it said had "resulted in a very cautious approach to spending amongst consumers".
The firm said it had reduced its profit margins "in an effort to maintain and grow market share under these difficult conditions".
Up-to-date financial results for many Irish store operators are not available because they are privately owned and have no obligation to inform stock markets of their performance, so these figures provide an insight into the sharp decline of retailers linked to the troubled property sector.
With consumer confidence at a low ebb all year, Harvey Norman's performance is in keeping with the principle that retailers of big-ticket household items suffer most in times of economic distress.
Such trends have already been seen in the closure of the Irish branch of Habitat in May and a warning some weeks ago of "challenging" conditions here from DSG International, owner of Dixons, Currys and PC World.
Harvey Norman has rapidly built up a presence here since opening its first Irish store five years ago in Swords, Dublin. It ultimately plans to use its Irish business as a bridgehead into Britain.
The chain achieved a 7 per cent increase in sales to Aus$224.5 million (€131.38 million) in Ireland last year, a rise it attributed to business at new stores in Castlebar, Co Mayo; Little Island, Co Cork; and Carrickmines, Co Dublin, and a full year's trading at stores in Naas, Co Kildare, and Drogheda, Co Louth.
"We are well placed to take advantage of any improvement in the retail environment as a result of a concerted focus on controlling costs, growing our market share and exploitation of economies of scale," the company said.
"In the first half of 2009 we will open two new stores in Northern Ireland. This is an important move into a new growth territory. We will consolidate and improve our position in Ireland after a period of expansion in 2008, in the face of economic volatility in Europe."
