Costly long-term leases at Harvey Norman’s Irish stores are understood to be adding to the Australian retail giant’s woes in Ireland.
The company suffered a loss of nearly $43m this financial year at its 16 stores across the country (including two in the north of Ireland), with a similar outlook predicted for next year.
This follows a trading loss of nearly $50m for 2009.
According to the Irish Times, experts at Macquarie Bank estimate the retailer spends around $20m on rent every year in Ireland, with lease terms of up to 20 years.
It also estimates it would cost Harvey Norman around $400m to exit the country, with various reports claiming the firm isn’t likely to break even in Ireland until 2015/16.
At the AGM in Sydney last month, Harvey Norman Executive Chairman and owner Gerry Harvey reportedly lamented on the “unsolvable [Irish] problem”.
In relation to Ireland, Mr Harvey also told The Irish Times, “ I just can’t believe we got ourselves into so much trouble”.
The 71-year-old admitted, “a drastic improvement in macroeconomic conditions in Ireland”, was needed before it could make a profit. However, there was no mention of pulling the plug on the Irish arm.
“Strong roots have been established in the Irish market. The Harvey Norman brand is well-known in Ireland and is respected by both suppliers and customers.”
“Harvey Norman currently employs more than 800 Irish staff and is committed to Ireland for the long-term.”
The retailer has struggled in the Irish market since first opening in 2003. In 2008, Mr Harvey was forced to defend controversial comments he made about the Irish economy at another AGM.
“Ireland is a real worry,” he said. “Phew, just imagine you opened in Ireland, you’d want to go and cut your throat. The potato famine, someone said, the return of the potato famine in Ireland.”
He also admitted at the time that he regretted expanding into the North, saying that opening two stores there was a “bad mistake”.
by Claire McGreal