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Harvey Norman Profit Slumps as Slowdown Curbs Sales

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May 3 (Bloomberg) -- Harvey Norman Holdings Ltd., Australia’s largest electrical-goods retailer, said nine-month earnings dropped 25 percent as a consumer slowdown curbs sales and discounting crimps profitability.

Unaudited pretax profit fell to A$204.8 million ($211 million) in the nine months ended March from A$272.3 million a year earlier, the Sydney-based company said in a statement today. Sales in the period dropped 6.7 percent.

The highest borrowing costs among developed countries, increased utility prices and soaring household savings have cut consumer demand for televisions and computers as retailers lower prices to retain market share. The Reserve Bank of Australia’s decision to deliver the biggest interest rate cut in three years this week may help reverse declining consumer sentiment, Chief Executive Officer Gerry Harvey said May 1.

“The strength of the Australian dollar and continued price deflation has eroded average selling prices, and ultimately, retail gross profit margin,” the company said in the statement today.

Harvey Norman shares fell 1.5 percent to A$2.04 at the close of trading in Sydney. The stock has slumped 24 percent in the past year.

Third-quarter sales fell 8.1 percent with revenue from outlets open at least a year dropping 7.5 percent, it said.

Total revenue was expected to fall 3.5 percent in the March quarter with same-store sales to decline 4.5 percent, Phillip Kimber, an analyst at Goldman Sachs Group Inc, wrote in a report today.

Shaun Cousins, an analyst at JPMorgan, predicted a 5.8 percent decline in total sales and 5.3 percent fall in revenue form outlets open at least a year, according to a separate report before the announcement.

To contact the reporter on this story: Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net

To contact the editor responsible for this story: Edward Johnson at ejohnson28@bloomberg.net

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