HVN Harvey Norman
09-07-2026
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Over the past 5 years, Harvey Norman Holdings Ltd (ASX: HVN) experienced a peak in profits and Return on Equity (ROE) in 2021/2022 during the pandemic retail boom, followed by a decline in earnings, before rebounding strongly. Debt has remained strictly managed and the company's financial health has stayed sound. [1, 2, 3, 4, 5]
Financial Performance Overview (5-Year Trajectory)
- Profit & Revenue: The company saw record net profits of about $811.5 million in FY22. Profits then declined over the next two years as consumer spending normalised. However, the business bounced back significantly, posting a FY25 net profit of $518 million (a 47% increase from FY24) and an interim net profit of $321.9 million for 1H26. Total system sales revenue remains robust, exceeding expectations with international store expansions. [1, 2, 3, 4, 5, 6, 7]
- Debt Level: The company’s Balance Sheet Health is solid, with a low debt-to-equity ratio consistently hovering between 13% and 21% over the last few years. The low net debt is supported by a massive freehold property portfolio (valued over $4.5 billion). [1, 2, 3, 4]
These are its recent D/E ratios:
2026 - 0.50
2025 - 0.47
2024 - 0.50
2023 - 0.49
2022 - 0.44
2021 - 0.45
- Return on Equity (ROE): ROE peaked at 23% in 2021, but subsequently fell to a low of about 7.9% in FY24 due to rising equity and softer post-COVID earnings. Following the profit recovery in FY25, ROE has since recovered to an estimated 11.55%. [1, 2, 3]
- Dividends: HVN remains a reliable dividend payer, maintaining or adjusting solid dividend distributions to shareholders, with yields generally trading between 6% and 7%. [1, 2]
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The Price-to-Earnings (P/E) ratio for Harvey Norman Holdings Limited (ASX: HVN) has fluctuated between a minimum of 4.94 and a maximum of 19.36 over the last 10 years, maintaining a long-term median of 10.93. [1]
Track Annual P/E Ratio Changes
| Calendar Year | Historical P/E Ratio | Year-over-Year Change |
|---|---|---|
| 2025 | 13.7 | -7.2% |
| 2024 | 14.8 | +93.47% |
| 2023 | 7.65 | +55.43% |
| 2022 | 4.92 | -16.2% |
| 2021 | 5.87 | -47.0% |
| 2020 | 11.08 | +15.5% |
| 2019 | 9.59 | -21.4% |
| 2018 | 12.20 | +6.1% |
| 2017 | 11.50 | -21.1% |
| 2016 | 14.58 | +13.6% |
Review 10-Year Statistical Summary
Analyze Key Historical Phases
1. The Post-Pandemic Margin Squeeze (2022–2023)
Harvey Norman hit a notable cyclical bottom in 2022 with a P/E drop down to 4.92. This low valuation occurred despite massive consumer electronics spending because the market anticipated a harsh drop-off in discretionary spending due to climbing RBA interest rates. [1]
2. Earnings Compression and Valuation Spike (2024–2025)
3. Modern Trading Context (2026)
The current Trailing Twelve Months (TTM) P/E ratio hovers around 10.28 to 10.62. This sits in line with its 10-year historical median, marking it as significantly discounted relative to the broader ASX retail sector average which sits closer to 18.9x
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ROIC vs WACC
Over the last 10 years, Harvey Norman Holdings (ASX:HVN) has generally maintained an ROIC (Return on Invested Capital) above its historical median WACC (Weighted Average Cost of Capital), indicating positive economic value creation. [1, 2, 3]
Current & Historical Metrics
- Current ROIC: Hovering around 7.6% to 7.78% (with trailing variations down to ~4.11% depending on recent down-cycles). [1, 2, 3]
- Current WACC: Estimated between 6.78% and 9.72%, which sits notably higher than its 10-year median WACC of roughly 5.62% due to rising global interest rates and shifting costs of debt and equity. [1, 3, 4]
- 10-Year Trend: For most of the past decade, Harvey Norman Holdings earned an average ROIC comfortably higher than 5%–6% WACC benchmarks, though recent tightening spreads mean economic profit has compressed during softer retail periods.
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Buffett analysis
Harvey Norman Holdings Limited (ASX: HVN) generates a moderate historical Return on Equity (ROE) that fluctuates with consumer cycles. While it falls short of Warren Buffett's strict benchmark for elite businesses, its heavy real estate ownership model structurally lowers its ROE compared to asset-light retail peers. [1, 2, 3]
Historical ROE Trends (FY22–FY26)
Over the past five fiscal years, Harvey Norman’s ROE has averaged 12.5%, peaking at 20.0% in June 2022 due to post-pandemic consumer spending before bottoming out at 7.9% in June 2024. As of the full-year 2026 results, ROE stabilized at 10.9%. [1]
| Fiscal Year | Return on Equity (ROE) | Drivers & Context |
|---|---|---|
| 2022 | 20.0% | Peak cyclical earnings from structural home-office and electronics booms. |
| 2023 | 12.4% | High inflation and rising interest rates compressed discretionary retail margins. |
| 2024 | 7.9% | Cyclical trough; notable consumer slowdown and tightening consumer wallets. |
| 2025 | 11.1% | Operational recovery and cost management initiatives. |
| 2026 | 10.9% | Subdued trading conditions; weighed down slightly by a major ASIC legal penalty. |
Evaluation Against Buffett Benchmarks
Warren Buffett evaluates companies using specific capital allocation, debt, and returns guidelines. Harvey Norman's hybrid corporate structure—part franchisor, part retail store operator, and part property tycoon—creates a unique profile when measured against these criteria.
1. The ROE Standard (Buffett Benchmark: Consistently >15%)
- The Verdict: Fails ❌
- Analysis: Buffett targets companies that can consistently achieve a 15%+ ROE without relying on excessive leverage. Harvey Norman's 5-year median sits at 11.1%. However, this failure requires nuance: HVN owns billions in premium physical real estate. This heavy property portfolio expands the book value of equity, which mathematically depresses ROE compared to an asset-light pure-play retailer like JB Hi-Fi (ASX: JBH). [1, 2, 3, 4]
2. Debt & Financial Fortitude (Buffett Benchmark: Long-Term Debt < 5x EBITDA)
- The Verdict: Passes
- Analysis: Buffett strongly dislikes companies that rely heavily on debt to generate returns. HVN's balance sheet lists $1.89B in explicit long-term debt against $849M in EBITDA (a Debt/EBITDA ratio of roughly 2.2x, safely under Buffett's threshold). If capitalization of lease obligations pushes total liabilities closer to $2.3B, its net debt-to-equity ratio of 42.4% still places it well within conservative, solvent boundaries for a retail-and-property conglomerate. [1, 2, 3, 4]
3. Capital Allocation & Retention (Buffett Benchmark: High Return on Retained Earnings)
- The Verdict: Mixed ⚠️
- Analysis: Buffett expects management to test whether every dollar retained inside the company generates at least one dollar of market value. HVN’s capital allocation prioritizes heavy, consistent dividends, with a payout ratio consistently between 64% and 77%. [1]
- Remaining capital is reinvested heavily into international retail rollouts (e.g., Malaysia, Ireland, and New Zealand) and property development. While these property investments act as an excellent inflation hedge and balance sheet anchor, their lower asset-turnover nature limits capital compounding speed, resulting in a low overall Return on Invested Capital (ROIC) of 7.18%. [1, 2]
Strategic Takeaway
From a strict Buffett perspective, Harvey Norman does not fit the profile of a compounding "economic moat" powerhouse due to its cyclicality and asset-heavy structural drag on ROE. It functions instead as a well-capitalized, real-estate-backed income stock that remains highly dependent on macroeconomic cycles.
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