As Australia has grappled with extreme cost-of-living pressures prompted by rising interest rates and inflation, eCommerce company Harris Technology (ASX: HT8) has demonstrated resilience and strategic prowess to deliver consecutive cash flow positive quarters, expanding its low-cost alternative tech products that have proven hugely popular.
For the quarter ended 31 December 2023, Harris Technology reported $4.9 million in sales revenue and positive operating cash flow of $235k, following on from the $226k reported in the September quarter. It also continued the momentum carried into FY24 after generating $486k of cash flow in FY23 when consumer spending was at its thinnest due to macroeconomic pressures.
As a trusted retailer that has been operating in Australia for more than 30 years, Harris Technology has gradually expanded its portfolio of private-label products. This has seen a shift in Harris Technology’s inventory strategy in the aftermath of COVID, whereby the Company has prioritised high-margin products ahead of revenue.
This subsequently saw Harris Technology expand into the Household category to service all rooms of the home rather than just offices, as well as its Manufacturer-to-Consumer (M2C) division of private-label products sold through online marketplaces.
The strategic pivot saw Harris Technology largely exit big-ticket items with high inventory hold times, instead meeting this demand for low-cost alternatives. Sales have also benefited from an international presence where Harris Technology has been able to test products in international markets before listing them in additional countries.
CEO, Garrison Huang, highlighted the success of the margin mix, stating, “The result reflects our inventory strategy to prioritise higher-margin products ahead of revenue through tough retail trading conditions over the past 12 months.
“Customers have demonstrated higher price sensitivity around technology products, who we have gradually served more through our M2C private-label and refurbished tech products as verticals we will continue to expand.”
The December quarter saw inventory on hand at $4.05m, a marginal decrease from the September 2023 value of $4.15m, but this was largely comprised of new products where Harris Technology invested $3.7m in purchased inventory during the quarter. That figure was slightly higher than the $3.4m reported in September but validated the initiative on inventory replenishment while maintaining a focus on high-margin products and prudent cash management.
Gradual increases in inventory spend have been planned for Harris Technology as the Company continues its cash flow trajectory with new M2C products slated for online listings. The Company is also an authorised reseller of refurbished products on all major online marketplaces where they acquire second-hand products which are then refurbished with new hardware. These products are proving increasingly popular over the newest (and most expensive) generation of phones, tablets and laptops.
Mitch Korver is a Business Writer focused on high-growth companies listed on the ASX in the small and medium cap space.
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