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Harvey Norman & DJs Shares Smashed As Market Crashes

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Shares in Australian retailers were smashed as Australian shares plunged at today’s opening, shedding $56 billion within minutes. As the market overall fell 4.4% the share value of Harvey Norman slipped 6.40% while David Jones slipped a massive 6.76%.

JB Hi Fi went down 4.57% while Woolworths (the owners of Dick Smith) and Wesfarmers (the owners of Officeworks) dropped less than 2%.

Woolworths dropped 1.6% while Wesfarmers, the owner of Coles dropped 1.7% 

Shares fell 4.4%  on the All Ordinaries Index, or 192.3 points, to a two-year low of 4160.6. The losses add to the $65 billion last since Tuesday.

”We’re seeing a total collapse of confidence,” Brisbane-based fund manager Peter Wright of Bizzell Capital Partners told Fairfax Media. ”Three big selloffs in a row like this haven’t been seen since the GFC.”

As the market heads for a perfect storm following the overnight collapse of shares in London and on Wall Street, retailers are now facing a bleak second half as consumers hold onto their savings.

US stocks plunged more than 4 per cent this morning and every key index in Europe shed more than 3 per cent as fears of a fresh global economic downturn stalked trading floors on both sides of the Atlantic.

The rout on Wall Street saw the Dow Jones close down more than 4.3 per cent – its worst one-day drop since February 2009 – while the tech-heavy Nasdaq plunged more than 5.1 per cent.

“Locally, it’s going to be a horrendous session…with all sectors expected to get smashed,” Melbourne-based IG Markets strategist Ben Potter told the Australian newspaper.

“It’s going to be a very ugly end to an even uglier week, with the first hour of trade likely to see large amounts of forced selling as participants are forced to meet margin calls. After that, hopefully, things will stabilise a little and we can tread water into the close.”

The fact that Harvey Norman appears to be stalling the announcement of their latest results is not a good sign.

Today the shares hit a new 52 week low of $1.92 as the company again failed to announce 4th quarter and 2011 financial year sales.

Yesterday the retailer was singled out by the productivity commission for selling products up to 50% dearer than the cost of the same products on overseas web sites.

In recent weeks Harvey Norman had a falling out with long time partner Logitech with some observers now questioning whether Harvey Norman is the place to go to buy discounted consumer electronics and IT gear.

More to follow.

Plasma/LCD Mount With New Twist

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Atdec, the Australian designer and manufacturer of display mounting systems, has launched the Telehook 31-42 Pivoting Wall Mount – the first to allow both landscape and portrait positioning of LCD or Plasma flat panel displays.

The 31-42 Pivoting Wall Mount is the latest addition to Atdec’s Telehook series of wall mounts. The Telehook series provides a range of practical solutions for mounting all types of large, flat panel LCD or plasma displays.

“Sales of 30 to 37 inch LCD and Plasma televisions are growing strongly in Australia, and the Telehook 31-42 Pivoting Wall Mount addresses the needs of this market segment by offering consumers a simple, flexible and affordable mounting solution,” said Stephen Crozier, Managing Director of Atdec Pty Ltd. “Users are given the option of displaying their screen in either a portrait or landscape position. It opens up new possibilities for using flat panel displays for decorative purposes, as well as for entertainment”.

The 31-42 Pivoting Wall Mount also offers users the flexibility of adjustable tilt and pan options from -20 to 20 degrees on the wall.

The Telehook 31-42 Pivoting Wall Mount is ideal for LCD and Plasma Flat Panel Displays from 31in. (78cm) to 42in. (106cm), weighing up to 50kgs (110lbs). It suits Video & Electronics Standards Association (VESA) compliant displays with 100mm x 100mm (4in. x 4in.) and 200mm x 100mm (8in. x 4in.) mounting hole patterns.  The design features a maximum distance of 81mm from the wall to the back of the display.

Atdec partners with most of the key AV organisations such as NEC, Hitachi, Fujitsu, Samsung, LG, BenQ, Sharp, Sony, Panasonic, Acer, Dell and IBM designing equipment to suit their individual products. “These relationships and our own research keeps us informed of worldwide trends ensuring our products meet consumer demand and emerging technology requirements,” said Mr. Crozier.

Priced at $199 (inc. GST), the Telehook 31-42 Pivoting Wall Mount is available through leading audio visual resellers, information technology resellers and major commercial furniture companies such as Thinking Ergonomix and CEDIA members as well as retailers including Harvey Norman and Domayne. Atdec’s Australian State distributors are: Ground Floor Marketing (Victoria and Tasmania), Debetrek ( Queensland and Northern Territory), Sylex (Western Australia), Leader Computers (South Australia) and Corporate Express; New Zealand distributors are Sylex and Metrolink. 

Product enquiries can be made to Atdec on or www.atdec.com.au.

NSW Minister Proposes Creative Accounting To Secure IT Funding

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The NSW government who last month instructed the Education department to mark up the cost of IP classroom gear to schools by up to 25% has now been caught out proposing a “creative accounting” scheme in an effort to snare hundreds of millions of dollars in additional funding from the Federal government for the roll out of their computers in schools program.

Documents obtained by the Nine Network reveal that the NSW Treasurer Michael Costa demanded $245 million extra over four years to take part in the scheme. In an effort to hide the additional funding for NSW he proposed that the Federal Government engage in creative accounting by making a payment for capital equipment as opposed to additional funds for the computers in schools roll out.


The secret payment would firstly avoid the State Government embarrassing federal Labor by pulling out of the deal, a key promise by Prime Minister Kevin Rudd and secondly not disclose to other States that NSW had received additional funding.
Earlier this year ChannelNews exclusively reported that the NSW Treasury had instructed the Education department to mark up $158 million of intelligent whiteboard, projector and software purchases by as much as 25% in an effort to recoup money back to the NSW Government.


Federal Treasurer Wayne Swan has dismissed suggestions the Federal government significantly under-estimated the cost of its computers in schools program. However several IT analysts have told ChannelNews that what the Federal Government has missed is the additional broadband and networking costs to tie the classrooms into one network.


According to the Sydney Morning Herald and AAP, Teachers Federation deputy president Bob Lipscombe said Mr Costa’s estimated figure of $245 million extra could fall well short of the cost of installing the computers.


“One might well ask why the federal government missed this when it was announcing the policy last year,” Mr Lipscombe told ABC Radio.
“We’re not even sure whether that ($245 million) would meet the needs of the support around the rollout in New South Wales.”

Foxtel Profits Slump As Netflix Takes Customers

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As expected Foxtel profits have taken a battering falling 8% after the Company was forced to slash prices ahead of the launch of Netflix.

In the year to June 2015 Foxtel only added 230,000 subscribers Vs more than 1,600,000 subscribers for Netflix who only launched in Australia on the 29th of March 2015. 

Foxtel’s moves to cut  its prices and counter competition from Netflix comes after Foxtel spent two decades price gouging consumers due to their monopoly in the pay TV market. 

Chief executive Richard Freudenstein’s decision to almost halve the price of Foxtel’s basic package from $49 to $25 a month in November pushed revenues 1 per cent higher and led to a 9 per cent leap in subscribers over the 2015 financial year.

Customer churn has been cut from 10.9 per cent from 12.5 per cent in the prior year – the lowest since 2000. Analysts believe this is due to consumers moving to cheaper Foxtel sports packages from premium packages that in the past delivered excellent profits for Foxtel.

Netflix has already attracted 1.6 million sign-ups and 900,000 paying users to its $9 to $15 a month service, Citi Research estimates.

“Last year we took the bold step of changing our pricing model to attract more customers,” said Foxtel CEO, Richard Freudenstein. “These results demonstrate that was the right call.”

Mr Freudenstein said the growth of 230,000 in subscribers was driven mainly by take up of traditional cable and satellite products and that “significant growth continued all the way through the financial year”.

But Foxtel is counting the early cost of the investment push, with its world-leading average revenues per user (ARPU) for cable and satellite dropping 2 per cent to $93 per month.

Subscriber revenues were up 2.4 per cent – lower than subscriber growth. Mr Freudenstein said that was “to be expected as we launched in November and therefore most of that increase came in the second half of the year.”

Foxtel’s 50 per cent shareholder, Rupert Murdoch’s News Corporation, reported on Thursday morning that the pay TV giant’s full-year earnings before interest, tax, depreciation and amortisation slid 8 per cent in Australian dollars.
News Corp said its equity earnings from Foxtel fell from US$90 million ($121.8 million) for the year to US$59 million.

Telstra, which owns the other half of Foxtel, said it had received a reduced dividend of $165 million, down from $125 million.

On a conference call with investors this morning, News Corp said it expects Foxtel to return to growth in its operating earnings in fiscal year 2016.

Mr Freudenstein said the decline in ARPU was “anticipated as part of the pricing changes”. He said “the vast majority of new customers” took up one or more tiers – such as sport, drama or movies, in addition to the $25 (basic) entertainment pack.

“This is a great result in an increasingly competitive space. It makes it clear that consumers understand the real benefits that only Foxtel can offer, “he added

Foxtel faces a growing threat from SVOD services, amid evidence that some customers have abandoned Foxtel’s drama and movie packs – some of them in favour of new, cheaper streaming services led by Netflix. 

According to News’ accounts, Foxtel’s net income fell 24 per cent to US$232 million from US$304 million as a result of “short-term impacts related to the investment in key initiatives: the new Foxtel pricing and packaging, increased investment in Presto (its own video-streaming service) and the launch of Triple Play (its broadband, cable television and telephony service)”.

BREAKING NEWS: Senior Director Quits Dick Smith After Just 14 Months

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In a shock move, Rod Orrock the Director of Buying and Marketing at Dick Smith has quit 14 months after leaving a senior role at Harvey Norman to take a role at the mass CE retailer.

Orrock, who was tipped to take on the CEO role at Dick Smith will leave the Company on September 15th according to a leaked email from CEO Nick Aboud to senior Dick Smith management. 

Aboud claims that Orrock is leaving due to “Health Concerns”. 

Orrick joined Dick Smith on June 20th 2014.

Mark Scott has now been appointed to lead the buying team at Dick Smith he will also continue in his role as Director of Operations. 

In his email Aboud said that he will personally be working closely with Mark and the buying team to “ensure that we continue to operate effectively”. 

During his time at Dick Smith Orrack has been responsible for the opening of 25 new Dick Smith stores, a move into appliances as well as the setting up of a Dick Smith store at Sydney International airport.

COMMENT: Missing Numbers Flaky Results, Why Gerry Harvey Should Quit

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COMMENT: What’s the difference between Woolworths, Coles and Harvey Norman? A lot when it comes to responsible financial reporting and the way in which their operations are run.

A trip through the annual financial reports of all three companies reveals that a lot is lacking when it comes to trying to glean information from the Harvey Norman annual report.

There are no breakdowns of how his consumer electronics or IT divisions is performing because Gerry Harvey and his management team don’t want the market to know how each individual division is performing.
 
Are appliances doing better than IT or are furniture sales propping up the company?

The fact is we will never know because the inclusion of performance breakdowns would expose some of the weaknesses in the Harvey Norman operation. Talks to analysts will tell you that Harvey Norman is more a retail property company than smart discount retailer.
 
Unlike Coles, who publish their Officeworks store’s department performance or Woolworths who does the same with its Dick Smith stores, Harvey Norman chooses to hide their numbers and one has to question why?

Is it because their consumer electronics and IT operations are struggling up against JB Hi Fi, Officeworks, Dick Smith and the likes of The Good Guys?

Analysts and Investors are now calling for more transparency and better reporting by the retail giant who is suffering on several fronts. It was only 12 months ago that Gerry Harvey was telling the world that Clive Peeters was a “great buy” at $35M, now after losing a million dollars a month from a business that was breaking even when he acquired it, which he intends to shut down at an additional cost of 10 million.

 It was only a few years ago that Harvey Norman had 60% of the Australian IT market, which is the era when brands like Logitech made serious money partnering with the retailers.

Recently they walked away from Harvey Norman due in part to what is called the “Gerry Tax” which is the 20% that Harvey Norman demands above normal profit margins. There is also the issue of falling sales with Logitech executives claiming that as Harvey Norman demand more from the Swiss Company that sales from his stores were actually falling while climbing with other retailers.

Once a great discount retailer, Gerry Harvey and his wife Kate Paige, who plays a key role in the Harvey Norman business appear to be on a slippery slope, as Gerry makes ill-timed and  ill-informed comments about online retailing and the lack of a GST Tax.

Last week he was blabbering Australians should be “as happy as pigs in shit” with low unemployment and the resources boom, but he reckons they’re too frightened to spend – in his stores presumably – and has predicted this Christmas will be a shocker.

 

 Or is it more a case of products being expensive in Harvey Norman stores and when consumers do walk into his stores they get a poor retail experience?

Melbourne based writer Leon Gettler said that Gerry Harvey is kidding himself if he blames his problems on nervous consumers. The idea of the so-called cautious consumer is not what it’s cracked up to be.

He says that despite the signs emblazoned all over the front of shops advertising 30 per cent, 50 per cent and 70 per cent discounts, no one is buying. But that’s not about consumers being too scared to spend: it’s a failure of his retail management strategy.

Blaming his poor performance on frightened consumers is a cop-out,  as yesterday’s ABS numbers reveal household spending is not weak at all.

The hard reality is that Harvey Norman appears to be more a property company than a smart retailer. His recent 9% climb in profits was more attributable to a revaluation of his property portfolio than it was selling more products.

Gettler claims that a closer analysis of GDP figures shows that household spending is doing well. Retail spending accounts for only 32 per cent of total household spending – in other words, more than two thirds of household spending is done outside the retail sector. 

Closer analysis of the data suggests that while retail sectors are experiencing serious deflation and weak spending volumes, households are spending more on non-retail goods and services.

Gerry Harvey is today being hurt by people and organisations that are smarter than he and his management team.

Well known for their bullying of vendors and distributors the Harvey Norman team is constantly being outperformed by the likes of JB Hi Fi who started out in 1974 selling audio equipment and records.

They are now a major seller of mobile phones, home theatres, computers anything with an Apple brand on it and above all content such as music, video and games products that are hard to find in a Harvey Norman store.

JB Hi Fi recognised that goods under $99 are often the bait that draws consumers into their stores.

 

Consumers who walk in to a JB Hi Fi store to buy an iPad, Phone or the latest Samsung offering are tempted by racks of cheap CDs and DVDs. In an age when retailers are worried about the Internet, JB Hi Fi is launching a digital music streaming service followed by a video streaming service.

Last week when I walked into a large Harvey Norman store in Sydney and asked for assistance the retail assistant told me that did not work in the IT department and that she would find someone who did, 10 minutes later I was still waiting.
 
What Gerry Harvey needs is a new younger management team, a team that have the passion and the nose to turn his business around. Most Harvey Norman executives today are clones of Gerry Harvey and he is a force who back in 1997 said the Internet was a “fad.” Since then he has fought the Internet day in day out as he has tried to hold onto consumers.

What he needs to do is retire and the sooner the better the business will be.

Windows Vista is next OS

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The name of Microsofts next consumer operating system has been revealed. It will be called Windows Vista.

Microsoft’s next consumer operating system to replace Windows XP will be called Windows Vista. The secret was revealed in a brief video message published by Microsoft on Friday. The first beta of the software is scheduled to be released on August 3 2005. Microsoft’s next-generation operating system shed its codename early Friday when Microsoft posted a 68-second video message on its website that had the sole purpose of introducing the name of the final product:

Microsoft associates the terms “clear”, “confident” and “connected” with the new operating system, hinting to various new features of the software – including a new graphics engine, more multimedia capabilities, improved organisation of information, more security, and easier to use networking features for various devices around the house. The first beta version of the software is heading towards IT professionals and developers on August 3, according to Microsoft. The final product will be released in the July 2006 timeframe, which will be preceded by at least one release candidate (RC) and a second beta, which is rumoured to become available sometime in November of this year. According to Microsoft, the video message was taped at a recent briefing for the firm’s global sales and marketing staff.

 

 

 

COMMENT:Why Sharp Is A Massive Basket Case

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Sharp Australia hasn’t got much left in the consumer appliance market, they got out of the TV market last year, not because their TV’s were inferior but because of poor marketing resulting in a lack of uptake by consumers.

Now their appliances business is on life support as their parent Company is set to be flogged to Taiwanese Company Foxconn, in a multibillion dollar deal that could well see the Companies consumer products disappear from Australian shelves.

Sharp make extremely good products but they don’t know how to price them or market them because of a combination of poor Japanese management and local management, who don’t have a clue when it comes to delivering cut through marketing. 

Sharp management have failed dismally resulting in lost jobs, and a once great brand relegated to the back end of stores. 

The Sharp Australia web site which is a low cost way for the Company to market their products.

 But the problem is that this site is shocking and local management, don’t have a clue when it comes to social media marketing, which in the USA is seriously driving sales for Sharp.


Click to enlarge
Sharp Australia Intro Page


Click to enlarge
Same Product Page On the Sharp US web site

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Sharp Australia product page, 1999 type design.

Click to enlarge
Same type of product page at Sharp USA with scrolling benefits.


In the USA Sharp appliances are top of mind and growing, but when it comes to online the difference between the Sharp Australia web site and the US site, the difference is like chalk and cheese.

While the Australian web site looks like something from the early days of online the US web site is engaging and designed to deliver information for consumers.
 
Deloitte Australia Research shows that 65% of consumers are going online to search for information prior to shopping, they either visit a retailer’s web site or go direct to a vendors site who redirects them back to a retailer to buy or like Sharp in the USA sell the product direct. 

 According to a recent study by e-commerce analytics company Clavis Insight, Sharp trumps its top five online competitors in the big US market, including Panasonic who are the #1 microwave supplier in Australia in five key metrics: availability, image presence, content, keyword search and customer ratings.

With 17 percent of market share by volume in 2015, according to Euromonitor, Sharp leads the pack with strong breadth and depth of distribution among online appliance retailers analysed in the study.
 
Specifically, at least 15 Sharp models were offered by the trio Amazon, Target.com and Walmart.com – while Target’s e-tail site carried 33.

What’s more, the brand outperformed its peers on both search performance and image presence, offering multiple product views on a large majority of its product pages. 

This must be embarrassing for Sharp Australia staff who believe marketing is still about giving retailers a bundle of cash and expecting them to build the brand and market the product using catalogues, store visits and online. 
Along the way they slap together some external marketing to demonstrate to retailers that they are actually conducting some form of external marketing.

Today a strong web site that promotes a brand as well as products is a critical part of any marketing mix.

Also critical is video as 63% of all transactions at web sites like Harvey Norman and JB Hi Fi are coming from portable devices such as a smartphone or tablet. Consumer today want to simply press a button, watch a video and then make a decision as to their next move.

Sharp’s problem is not about money, it’s all about deadwood.

What Sharp Australia needs is a Young aggressive digitally savvy marketing team that can ID the right products for Australia and then aggressively market them.

They need to give the brand CPR so that when it comes back to life consumers actually want to engage with the brand. 

At one stage Sharp branded products were an object of pride for both Australian and Japanese consumers.

Sharp started to come unstuck in 2005 when Japanese management started to believe that the brand was invincible.
 
They believed that their new LCD/LED TV production plant at Kameyama was the be all of TV production plants.
 
The only problem was that the Japanese management was only watching the Japanese markets and not overseas markets like Australia or the UK and the USA, while at the same time they failed to capture orders from third party TV Companies to manufacture display components.

This resulted in the Company racking up massive losses.
 
Even while the plant was pumping out product, it was seriously in debt due to competition from other TV manufacturers, including Chinese and Korean manufacturers.
 
The blinkered world view that still exists at Sharp Australia today has destroyed a once great brand. 

Now the Japanese are fretting at the loss of the iconic brand to a Taiwanese Company Foxconn who has made a name for themselves making goods for Apple. 

at the heart of Japan’s reluctance to let Sharp be sold to Foxconn is the bile building up in the throats of Sharp management and Japanese Government official’s that the know how once owned by a great Japanese Company is set to fall into the hands of a competitor. 
The anxiety comes from a deep feeling that denies the ascendance of Taiwan, China and South Korea in realms where Japan once reigned. 

Japanese media never seriously discuss the fact that companies such as LG, Samsung and Haier now dominate the global home electronics field.
 
A few pundits and journalists have made the case that not only does Sharp’s likely sale to Hon Hai not signal the end of the world, but that it could turn out to be a good thing for Japan. 

During a recent Japanese TBS Radio discussion, listeners sent in questions betraying their nervousness over the deal.

One listener remarked that if Hon Hai buys the ailing company, Sharp will merely become a “maker of goods.” Atushi Osanai a Japanese academic told the listener that, in fact, Hon Hai was buying Sharp because it admires the company’s knack for new ideas.

What he failed to communicate was the fact that Japanese Companies are making great products but they are failing dismally when it comes to marketing the products.
 
Sharp who does not have much of a profile outside Japan due to its lack of initiatives is doomed to becoming a supplier of components. 

Japanese electronics makers “have never had an overseas strategy,” according to Osanai, unlike Japanese car makers. He claims Hon Hai will give Sharp that chance, something the Innovation Network Corporation of Japan who also been bid for the Company would not have been able to do.

Foxconn says it will not sell off any part of Sharp, though that could change once the financing dust has settled.

 Japanese media say that Hon Hai wants Sharp for its display technology, but there is nothing special about Sharp’s LCDs, which have become a commodity because Sharp management were unable to sell the superiority of their panels. 

In truth, it wants to get into the IOT (Internet of things) business, by producing home appliances that can connect to the Web, and for that it needs Sharp’s know-how. Hon Hai’s rival, Haier, bought General Electric’s appliance business for the same reason.

Softbank another big Japanese Companies popular robot, Pepper, is manufactured by Foxconn another fact the media rarely mentions but one that is central to the issue of Sharp’s worth to the company. “Hon Hai is just like Pepper,” said Osanai. “You can tell it what to do, but it won’t come up with ideas on its own.”

Harvey Norman + Dick Smith Online Back End Up For Sale

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EBay is set to sell eBay Enterprise the owners of Magento the Company that powers some of Australia’s largest retail web sites including the backend of the Harvey Norman web site.

Among other users of the Magento retail software offering are  Bing Lee, Dick Smith, Winnings Appliances and Big Brown Box as well as IKEA and several leading International brands who sell into Australia. 

Private-equity firm Permira is tipped as the organisation that is interested in buying eBay Enterprises for a reported around $900 million, according to people familiar with the matter.

The deal, which was being finalized early today, could be announced as soon as Thursday US time (Friday Australian time) when eBay is scheduled to release second-quarter financial results.

EBay also plans to complete the spinoff of its PayPal payments unit on Friday.

EBay has been seeking a buyer for the Enterprise unit, which helps power online retail sites for companies such as Harvey Norman, IKEA , since at least January, when it said it also could also spin it off.

The unit suffered a blow last week when Toys “R” Us  one of its larger customers, said it would take its U.S. business in-house by mid-2016.

An eBay spokesman declined to comment. New York-based Permira didn’t immediately respond to a request for comment.

According to the Wall Street Journal EBay  also been in talks recently with private-equity firm Thomas H. Lee Partners LP to sell the unit for as much as $1 billion.

Resolving the fate of eBay Enterprise, formerly known as GSI Commerce, is among the final loose ends the company hoped to tie up before its new life as a stand-alone company.

The roughly $900 million price would be less than half the $2.4 billion that eBay paid in 2011 for the unit. In the hopes of securing a deal, eBay had extended the prior deadline of June 30 to Wednesday, one of the people said. The people said there was no guarantee a deal would be reached.