Trio of Harvey Norman subsidiaries in administration

Harvey Norman has appointed an administrator to three of its failing stores, amid complaints by landlords about unpaid rents on two abandoned Rick Hart stores in Western Australia.

In a statement released to the Australian Securities Exchange on Friday, Harvey Norman confirmed David Levi has been appointed as administrator for three wholly-owned subsidiaries.

The subsidiaries in question are the Clive Peeters store in Bendigo, Victoria, and two Rick Hart stories in Mandurah and O’Connor, both of which are in WA.

The news follows Harvey Norman’s acquisition of the Clive Peeters and Rick Hart chains, after the collapse of Clive Peeters Limited in 2010.

In August, Harvey Norman chief executive Gerry Harvey announced he would shut four Clive Peeters stores in Victoria, including the Bendigo store.

He also announced the closure of three Rick Hart stores in WA: Mandurah, O’Connor and Osborne Park.

Meanwhile, the company confirmed it would rebrand 16 stores under the Harvey Norman banner, while another two would be rebranded as Joyce Mayne.

The ASX notice on Friday follows the news that a Harvey Norman subsidiary is being sued by two landlords for refusing to pay rent on stores that have been closed down.

Landlords Minproc and Primewest told The Australian Financial Review they were owed several million dollars in rent on the abandoned Rick Hart stores in Mandurah and Osborne Park.

However, Harvey told the paper he had received legal advice that it could vacate the premises and did not need to pay rent. Harvey was contacted for comment but is travelling overseas.

2011 has been a tough year for Harvey Norman. Last week, the company admitted sales in Australia were down 2.9%, with a 2.8% drop in like-for-like sales.

“The strength of the Australian dollar, price deflation and intense competition eroded average selling prices and, ultimately, retail gross profit margins,” company CFO Chris Mentis said.

Earlier in the year, Gerry Harvey called on the Federal Government to introduce a 10% GST on purchases over $1000 made on overseas websites.

Consumers responded by criticising Harvey, claiming his current business model – which relies on the success of bricks-and-mortar franchisees – is not sustainable.

Meanwhile, the company’s online operation has no connection to its franchisees, with Harvey claiming this would disadvantage the franchisees and take business away from their stores.