Harvey Norman has blamed price deflation in its electronic division and the wet weather on the east coast of Australia for its 16.5 per cent half-year profit slump.

The electronic and furniture retailer announced that its half-year profit before tax from continuing operations was $198.61 million compared to $237.77 million for the half year of the same period on the previous year.

Harvey Norman chairman Gerry Harvey said there was a fall in prices for electronic goods such as flat-screen TVs, computers and whitegoods.

“The well documented price deflation for the half at around 30 per cent has compromised revenue growth,” he said.

“Manufacturers are indicating that price deflation will continue during the calendar year 2011, although not at the levels of 2010.”

Its franchised sales revenue fell by 1.4 per cent from $2.78 billion to $2.74 billion, in comparison to its company-owned sales revenue that saw a 12 per cent rise from $715.63 million to $804.13 million.

The $54.75 million acquisition of the Clive Peeter and Rich Hard retail brands saw its consolidated sales revenue for the half-year was $93.17 million and $31.60 million, respectively.

“This was below management’s expectations highlighting the impact of the damage to the brands prior to acquisition and the lead-time for customer acceptance and confidence in the reinvigorated business under Harvey Norman’s stewardship,” Gerry said.

“Heavy discounting continued post-acquisition to expedite the sale of old inventory acquired from the former business while management focused on building a stronger retail offering to consumers by implementing a new computer business.”

Despite the challenging environment, the company’s business model remains resilient, Gerry said.

“Our integrated retail franchise and property system is robust and growing market share, and is well placed to capitalize on any resurgence in the discretionary retail sector,” he said.

“Our furniture and bedding categories continue to outperform the market and we also achieved strong market share growth across all other key product categories.”

The company plans to enhance its portfolio with the development of a retail complex in Maroochydore, Queensland. It has also commenced its Springvale development in Melbourne, which includes an IKEA scheduled to open during the last quarter of calendar year 2011..