Harvey Norman is looking at a loss in Ireland this year, according to Citigroup.

Harvey Norman’s latest full-year profit result not only highlights the dramatic downturn in retail spending but also a series of ‘spot fires’ across the company’s retail empire.

The company’s computers category continued to perform poorly, with sales growth of only 4.1%, according to Citi Investment Research senior retail analyst Craig Woolford.

Computers lost share
“Harvey Norman has lost share in the notebook category, particularly for products in the lowest $500-$900 price bracket,” he said. “The category will remain tough for Harvey Norman given the company’s market positioning and continued price deflation in the sector.”

Woolford said the company’s largest category - electronics - slowed slightly to 7.7% in the fourth quarter to June 30 compared to the 10.1% growth reported in the previous quarter.

The result was supported by solid demand for flat panel televisions prior to the Beijing Olympic Games. Furniture sales remained subdued and were supported by positive bedding sales.

Offshore growth slowing
Citigroup also reports that Harvey Norman’s offshore growth “slowed dramatically” in the fourth quarter.

“Industry sales in New Zealand and Ireland have declined significantly compared with double-digit growth last year,” Woolford said.

“Both markets have been impacted by weak house prices and sharp declines in consumer sentiment. The rapid store growth by rivals in New Zealand has added to the pressure on margins,” he said.

“Ireland is likely to make a sizeable loss – forecast around $10.5 million - in FY08,” Woolford said.

As previously reported by www.connectedaustralia.com, Harvey Norman reported fourth quarter sales of $1.43 billion, a 5.5% increase.

Reported like for like sales rose 3.0%, but adjusting for Easter, the result was only 1.6% growth.

Harvey shares good value
On a more positive note, Woolford said that looking forward over the next 12 months: “We expect Harvey Norman’s shares to recover strongly with an improvement in the retail cycle. However, during the next six months the shares will likely remain volatile given the continued slowdown in retail spending.”