Harvey Norman's first half profits before tax from continuing operations dropped 16.5 percent to $198.61 million from the previous corresponding period, the company reported today.
Net profit after tax was $131.67 million compared with $158.86 million, a decrease from 17.1 percent.
Chairman Gerry Harvey blamed the profit slump on price deflation in key categories driven by the high Australian dollar, bad weather and costs incurred from buying Clive Peeters.
Earlier this month, the company said a 30 percent price deflation had "compromised revenue growth", and described the situation for electrical franchisees as “extremely difficult”.
Global sales increased 1.3 percent, but like for like sales decreased 3.1 percent.
“Our furniture and bedding categories continue to outperform the market and we also achieved strong market share growth across other product categories," Harvey said in today's financial statement.
“Our integrated retail franchise and property system in robust and growing market share and is well placed to capitalise on any resurgence in the discrentionary retail sector."
The acquisition of 28 Clive Peeters shops in July 2010 generated a combined revenue of $124.77 million but “significant” investment costs were incurred rebuilding and restructuring the business, it said.
The consolidated result for the half year was a loss of $20.67 million before tax.
A reduction in the profitability from franchising operations segment due to lower franchise fees collected during the period was also blamed.
Retail operations in Singapore, Malaysia, and Slovenia increased profit by $4.75 million before tax.
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