Harvey Norman’s Rapid Profit Growth Masks Overseas Market Challenges
Harvey Norman Holdings reported a robust 39% jump in profit before tax for FY25, driven by strong franchise sales, a booming property portfolio, and strategic international expansion.
- Reported profit before tax rises 39% to $753.1 million
- Franchisee sales revenue grows 6.1%, boosting franchising profit by 25.9%
- Property segment profit doubles, aided by $154 million revaluation gain
- Overseas retail expands with new stores in UK, New Zealand, Singapore, Malaysia
- Net debt to equity ratio improves to 13.43%, cash conversion at 95.1%
Strong Profit Growth Amid Diversified Operations
Harvey Norman Holdings Limited has delivered a standout financial performance for the year ended 30 June 2025, reporting a 39% increase in reported profit before tax (PBT) to $753.10 million. This surge reflects the company’s diversified business model, spanning franchising, property investment, and international retail operations. Excluding property revaluations and lease accounting impacts, underlying PBT still rose a healthy 9.3%, underscoring solid operational momentum.
Chairman Gerry Harvey highlighted the strength of the company’s integrated approach, noting that growth was driven by franchisee success, a resilient property portfolio, and measured global expansion. The company’s focus on digital transformation and in-store innovation also played a key role in sustaining growth across its core segments.
Franchising Operations Fuel Revenue and Margin Expansion
The Australian franchising segment was a major contributor, with profit before tax climbing 25.9% to $344.39 million. This was supported by a 6.1% increase in aggregated franchisee sales revenue to $6.43 billion. Franchisees benefited from strong consumer demand, particularly in Home & Lifestyle categories such as Mobile & Computer Technology and Electrical goods, where adoption of AI-enabled devices is accelerating.
Franchising margins improved to 5.36% from 4.52% the previous year, reflecting operational efficiencies and robust sales growth. Early trading in FY26 remains encouraging, with July franchisee sales up 6.6% year-on-year, suggesting sustained consumer appetite.
Property Portfolio Doubles Profit, Reflecting Investor Confidence
The property segment’s profit before tax doubled to $321.55 million, buoyed by a significant $154.38 million net property revaluation increment. Harvey Norman’s freehold property portfolio expanded to $4.53 billion, benefiting from strong investor confidence in large-format retail assets, steady rental growth, and record-low vacancy rates. This segment’s performance underscores the strategic value of property holdings as a key pillar of the company’s diversified earnings base.
International Expansion – New Stores and Market Challenges
Harvey Norman’s overseas company-operated retail segment contributed $109.99 million to profit before tax, representing 18.4% of total PBT excluding property revaluations. While macroeconomic headwinds in New Zealand weighed on profitability, growth in Ireland and Asia helped offset these pressures. The company’s strategic entry into the UK market with a flagship store at Merry Hill Shopping Centre in the West Midlands marked a significant milestone, despite incurring establishment costs.
Additional new stores opened in New Zealand, Singapore, and Malaysia, reflecting a deliberate and disciplined approach to global expansion. Early FY26 sales trends in these markets remain positive, signaling potential for future growth.
Financial Strength and Outlook
Total assets surpassed $8 billion for the first time, reaching $8.37 billion, while net assets increased to $4.84 billion. Operating cash flows remained robust at $694.30 million, with a strong cash conversion ratio of 95.1%. The net debt to equity ratio improved to 13.43%, reflecting conservative financial management and ample liquidity to support ongoing growth initiatives.
Overall, Harvey Norman’s FY25 results demonstrate the resilience and adaptability of its business model amid evolving market conditions. The company’s balanced focus on franchise growth, property value, and international presence positions it well for sustainable value creation.
Bottom Line?
Harvey Norman’s strong FY25 sets the stage for continued growth, but international market challenges warrant close watch.
Questions in the middle?
- How will Harvey Norman manage profitability amid macroeconomic headwinds in New Zealand?
- What impact will UK establishment costs have on overseas retail margins in FY26?
- Can franchisee sales momentum sustain through evolving consumer technology trends?