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Gerry Harvey, the boss of retail giant Harvey Norman, has confessed that he lost over one billion dollars during the recent financial crisis. The 69-year-old executive who still works between 50 and 60 hours a week for an annual salary of $500,000 a year believes that unemployment could reach 7%.
In an interview with Anthony Black of Compare, Harvey claims that he is optimistic that Australia can avoid a recession. He told Black that falling interest rates and the Federal Government’s $10 billion stimulus package will sustain economic growth, but at a slower rate. “I think the Government acted relatively early and the economy is still in good shape with unemployment marginally above 4 per cent,” Harvey said.
However he did admit during the interview that unemployment could rise up to 7 per cent despite predicting the Reserve Bank will cut the official cash rate to between 3 and 4 per cent during the next 12 months. “If the US has two quarters of negative growth and then a positive quarter of 1 per cent growth, then Australia should avoid a recession,” Harvey says.
On a personal note he admits that Harvey Norman’s retreating share price during the past 12 months has stripped him of more than a $1 billion in wealth.
“But say the US has four quarters of negative growth, then we might not be able to avoid a recession. These are things no one knows. No one can say, ‘I know what’s going to happen’. This is the most complicated financial situation (credit crunch) in 100 years, possibly ever. We didn’t have complicated derivatives at work during the 1929 stock market crash.”
Recently Harvey reported that He says sales at Harvey Norman and Domayne stores were down 5.8 per cent over a 28-day period to October 19 when compared to the same period last year.
Sales at his Irish stores are down 30 per cent for the September quarter. “It’s catastrophic in Ireland and it will take time to turn around,” Harvey says. “The wider economy in Ireland has crashed. But sales in Singapore and Slovenia are up.”
Black wrote Harvey says the fear factor in Australia is alive and well. “People are holding back, they’re not buying, they’re not going into debt. I suspect it’s the same at the local coffee shop and at car dealers.”
Between Gerry Harvey and his wife Katie Page they own 312 million Harvey Norman shares which makes up 30 per cent of the retail group.
From a high of $7.25 in November last year the shares have crashed to $2.60 levels. He says he was buying Harvey Norman shares on the way down from their 12-month peak.
Harvey says: “I bought Harvey Norman shares at $4.55, then at $3.90. I thought Harvey Norman shares were good value at $4.55.” But it’s a “paper loss”
He pointed out to Black that the company owns property valued at $1.68 billion and its debt-to-equity ratio of 26 per cent makes it one of the lowest-geared companies on the ASX.
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