-- Harvey Norman 1Q Profit Slumps 20%

-- Global sales down by 10%

-- Company says technology and entertainment sales affected by cautious consumer

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By Gavin Lower

MELBOURNE--Australian retailer Harvey Norman Holdings Ltd. (HVN.AU) reported a 20% drop in pre-tax profit in the first quarter as sales slumped amid weak consumer sentiment.

"Technology and entertainment sales continue to be affected by the cautious consumer and continued price deflation," the company said in a statement to the national stock exchange Wednesday.

Electrical goods retailers in Australia such as Harvey Norman have seen their profits hurt by discounting in the sector as several competitors closed and slashed prices to clear stock.

Harvey Norman, which also sells furniture, said unaudited preliminary accounts for the three months through September showed pre-tax profit of 50.1 million Australian dollars (US$52.2 million), down from A$62.8 million a year earlier.

It said sales in white goods, cooking, small appliances, furniture and bedding remained "solid."

Will Seddon, portfolio manager at White Funds Management, which holds Harvey Norman shares, told Dow Jones Newswires the company was not selling enough electrical goods such as Apple Inc. (AAPL) products, which were driving growth in the electrical space.

"They're selling the wrong products," he said.

In August the company reported its net profit for fiscal 2012 slumped 32% to A$174.5 million, while its profit before tax was down 39% to A$227.4 million.

Harvey Norman shares at 0350 GMT were down 4.2% at A$1.78 while the benchmark S&P/ASX 200 was up 0.2%. The retailer operates franchise stores in Australia, New Zealand, Slovenia, Croatia, Ireland and Northern Ireland.

It said global sales for the quarter were down 10% to A$1.33 billion and had been negatively affected by a deterioration in the value of the Euro and British pound.

Write to Gavin Lower at gavin.lower@wsj.com

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