Harvey Norman Profit Jumps 16.5% to $466M on AI-Driven Tech Demand
Harvey Norman delivers double-digit profit growth as AI-driven demand powers $5.16 billion in sales
Harvey Norman Holdings Limited has reported strong financial results for the half-year ended 31 December 2025, with profit before tax increasing 16.5% to $466.31 million. The result reflects the resilience of the company’s integrated retail, franchise and property model, with earnings per share climbing 15.3% to 25.84 cents and an interim dividend of 14.5 cents fully franked declared, representing a 20.8% increase on the prior corresponding period.
Total system sales revenue reached $5.16 billion, up 6.9% from 1H25, driven by aggregated Australian franchisee sales of $3.50 billion (+4.8%) and company-operated sales of $1.66 billion (+11.6%). The profit growth demonstrates the operating leverage inherent in Harvey Norman’s three-pillar business structure, with management maintaining cost discipline while system sales expanded.
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What drives Harvey Norman’s three-pillar business model
Harvey Norman operates an integrated retail, franchise, property and digital system across eight countries, structured around three strategic pillars that reduce operational risk while generating diversified income streams.
The franchising operations segment generates revenue without carrying inventory risk. Harvey Norman earns fees from 554 independent franchisees operating across 196 complexes in Australia. These franchisees purchase inventory independently and pay franchise fees based on their sales performance, enabling Harvey Norman to capture upside from retail growth without the capital intensity of holding stock.
The property portfolio provides stable rental income and capital appreciation. The company owns 50.5% of Australian franchised complexes (99 of 196), earning rent from franchisees and 480 third-party tenants including ASX-listed retailers. This property ownership creates a defensive income stream that underpins earnings stability regardless of retail trading conditions.
The overseas retail operations diversify geographic earnings through company-operated stores in seven countries. These wholly owned stores in New Zealand, Ireland, Singapore, Malaysia, Slovenia, Croatia and the United Kingdom now contribute 25% of total profit before tax excluding property revaluations, reducing dependence on Australian consumer conditions.
Franchising operations expand margins to 5.89% on $3.5 billion sales
Harvey Norman’s franchising operations segment delivered profit before tax of $205.93 million, up 14.2% from 1H25, with margins expanding from 5.40% to 5.89%. The margin expansion reflects operating leverage, with profit growth substantially outpacing the 4.8% increase in aggregated franchisee sales revenue.
Franchising operations revenue increased 8.8% to $588.30 million, driven primarily by a $41.38 million increase in franchise fees tied to higher franchisee sales volumes. Aggregated Australian franchisee sales reached $3.50 billion, with comparable sales growth of 4.7% demonstrating underlying momentum in technology-led categories. Performance was supported by increased consumer adoption of AI-enabled devices and continued demand for the Harvey Norman Next Gen-AI technology range.
Marketing expenses remained flat at 3.8% of system sales (compared with 4.0% in 1H25), while operating expenses as a percentage of system sales reduced to 17.8% from 18.0%. This cost discipline, combined with strong franchisee sales through the critical Christmas trading period, validates the resilience of the franchised model even as broader retail conditions remained uncertain.
| Metric | 1H26 | 1H25 | Change |
|---|---|---|---|
| Franchising operations PBT | $205.93m | $180.28m | +14.2% |
| Aggregated franchisee sales | $3.50bn | $3.34bn | +4.8% |
| Comparable franchisee sales | $3.47bn | $3.31bn | +4.7% |
| Franchising margin | 5.89% | 5.40% | +49bps |
International operations deliver 35.6% profit surge across seven countries
Harvey Norman’s overseas company-operated retail segment recorded profit before tax of $92.09 million, up 35.6% from $67.89 million in 1H25. Revenue from international operations increased 12.9% to $1.599 billion, supported by three new store openings during the half and improved trading performance across established markets.
Regional performance highlights included:
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New Zealand delivered PBT of $47.06 million, up 32.3%, on sales of $516.25 million (+5.8%). The result reflected market share gains in Electrical and strong demand for Harvey Norman Next Gen-AI technology in Computers, with operating leverage improving through disciplined cost control.
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Ireland recorded PBT of $25.08 million, up 40.0%, on sales of $460.40 million (+15.1%). Growth was broad-based across Furniture, Bedding and Electrical categories, with Mobile Phone and Computer Technology categories delivering standout performance driven by new product launches.
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Singapore and Malaysia combined delivered PBT of $27.92 million, up 27.9%, on aggregated sales of $407.87 million (+12.2%). Performance reflected contributions from newly opened stores in both markets, including Punggol Coast Mall (Singapore) and Kiara Bay and Gurney Plaza (Malaysia).
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Slovenia and Croatia recorded PBT of $5.44 million, up 102.6%, on sales of $145.02 million (+23.5%). The improvement reflected a full six-month trading period for the Slovenia store opened in October 2024, together with growing brand awareness.
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United Kingdom recorded an establishment loss of $13.41 million during its scaling phase. The Merry Hill flagship store, which opened in October 2024, recorded a loss of $10.98 million as the business transitions to a full-format flagship cost base while building brand awareness and customer traction.
The international segment now represents 24.9% of total profit before tax excluding property revaluations, providing meaningful diversification from Australian retail conditions.
Property portfolio grows to $4.67 billion with $96 million revaluation uplift
Harvey Norman’s property segment delivered profit before tax of $178.82 million, up 7.8% from 1H25, supported by net property revaluation increments of $95.80 million recognised in the income statement. The Australian freehold investment property portfolio increased to $3.98 billion, up from $3.72 billion at 31 December 2024, representing growth of $260.83 million over the past 12 months.
The revaluation uplift was driven by portfolio-level income growth, improved occupancy following the leasing of previously vacant space, and incremental income from targeted asset optimisation initiatives. Higher market rents achieved through positive leasing spreads on renewals and new leases, combined with modest firming in capitalisation rates, contributed to the valuation increase across 33 investment properties.
Harvey Norman
“The consolidated entity continues to be the largest owner of LFR (Large-Format Retail) real estate in the Australian market.”
The property portfolio comprises 99 owned franchised complexes (representing 50.5% of the 196 total complexes in Australia), generating rental income from Harvey Norman, Domayne and Joyce Mayne franchisees, as well as 480 third-party tenants across diverse categories including food, lifestyle, hardware, medical, pet and automotive. Internationally, 29 company-operated stores (24% of the total 121 overseas stores) are owned by the consolidated entity, with the overseas owner-occupied and investment property portfolio valued at $671.67 million.
Rent and outgoings received from freehold properties increased 3.9% or $5.84 million, driven by higher market rentals and lower vacancy rates. Excluding net property revaluations for both periods, the property segment result would have been $83.02 million for 1H26 compared with $81.11 million for 1H25, an increase of 2.4%.
Balance sheet strength underpins conservative gearing
Harvey Norman’s balance sheet remains conservatively structured, with net assets increasing 4.9% to $4.95 billion and total assets growing 6.3% to $8.77 billion. The net debt-to-equity ratio stands at 13.02%, reflecting low gearing and strong financial capacity.
Operating cash flows of $392.88 million represented a cash conversion rate of 96.2%, slightly lower than 1H25 primarily due to higher inventory funding to support sales growth, particularly in premium technology categories. The reduction in operating cash flows was driven by $168.74 million in higher payments to suppliers and employees due to new store openings and full six-month trading from stores opened during FY25, as well as $34.67 million lower receipts from franchisees as they increased utilisation of existing financial accommodation arrangements to fund inventory purchases.
Key balance sheet highlights:
- Net assets: $4.95 billion (+4.9%)
- Total assets: $8.77 billion (+6.3%)
- Net debt-to-equity: 13.02%
- Operating cash flows: $392.88 million
- Cash conversion: 96.2%
The predominantly tangible asset base, anchored by the $4.67 billion global freehold property portfolio, provides flexibility for ongoing expansion, dividend payments and potential acquisitions.
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Expansion pipeline includes UK stores and Asian growth
Harvey Norman has confirmed continued sales momentum into January 2026, with all regions delivering year-on-year growth in both headline and comparable sales. Australian franchisees recorded sales growth of 3.5% (total) and 3.6% (comparable), while New Zealand delivered 7.6% (total) and 9.3% (comparable) growth. Singapore recorded 8.7% total sales growth and 4.0% comparable growth.
The company has outlined a committed expansion pipeline across multiple markets:
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Australia: One franchised complex relocation to a new freehold site scheduled for 2H26, with three further relocations and one new complex planned for FY27. The refit programme continues, with three refits currently in progress and five additional refits planned to commence over the next 12 months.
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United Kingdom: The second store in West Midlands, located at Gracechurch Shopping Centre in Sutton Coldfield, is scheduled to open in April 2026. Advanced lease negotiations are underway for a third site within the West Midlands region, anticipated to open in FY27.
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Malaysia: Six new store leases have been signed. One new store is expected to open in 2H26, with two additional stores scheduled for FY27.
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Croatia: Land has been acquired in East Zagreb to develop a new Harvey Norman flagship store, expected to open in 2027.
The expansion pipeline demonstrates management’s confidence in both established and emerging markets, with capital allocated to opportunities offering attractive returns within the integrated retail, franchise and property model. The combination of continued sales momentum, expanding store networks and conservative balance sheet positioning supports the earnings growth trajectory demonstrated in 1H26.
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