HARVEY NORMAN, Australia's biggest furniture and electronics retailer, will cut advertising, slow hiring and focus on costs as the credit crisis raises the chances of a global recession.
"It's very bad. It changes how I run the business," said the firm's billionaire executive chairman, Gerry Harvey. "I've been holding off for a long time to avoid cutting wages and advertising, but now I am forced into that situation."
Mr Harvey, already contending with slowing sales growth and losses in Ireland, may scale back plans to open 15 new stores this year as the credit crunch makes it harder to tap debt.
In the first half of the year, Harvey Norman's 13 Irish outlets racked up average losses of €1.24 million a month.
While Mr Harvey expects Australia's central bank to lower interest rates by as much as two percentage points, the failure of lower borrowing costs in the US and Europe to boost growth means benefits may be limited.
"We've got a massive loss of confidence and, while you can easily slash interest rates here, it's not going to pump sales up the next day," Mr Harvey said. "If you look overseas, where they have 1 per cent, 2 per cent and 3 per cent interest rates, people are still having troubles."
Harvey Norman shares fell 39 cents, or 11 per cent, to $3.11 Australian dollars in afternoon trading in Sydney, extending this year's decline to 54 per cent.
Pretax earnings for the two months to August 31st fell 18 per cent to A$47.7 million (€26.7 million), Harvey Norman said in a statement.
Sales rose 6.9 per cent in the period, slowing from the 8.7 per cent pace of the June quarter.
Reserve Bank of Australia governor Glenn Stevens cut borrowing costs this month for the first time since 2001, lowering the benchmark interest rate by 25 basis points to 7 per cent, on concern that demand may "weaken more sharply than necessary". - ( Bloomberg)
