UPDATE 1.35pm: Harvey Norman's first-half profit has dropped by 36 per cent because of weaker sales and falling property values.
The retailer made a net profit of $81.9 million in the six months to December 31, down from $128.95 million in the previous corresponding period.
Total sales in the six months to December fell by 7.3 per cent from the previous corresponding period, to $2.88 billion.
The value of the company's properties dropped by $31.5 million in the six months to December, mainly because of losses on the value of three recent developments.
Chairman Gerry Harvey said retail conditions were still tough, but offered some optimism for the future.
"The aggressive discounting experienced in the second half of 2012 has stabilised and pleasingly we are seeing an uptick in sales," he said in a statement.
"Interest rates are at historical lows which should start moving the consumer back into the buying cycle from the savings cycle.
"The company closed nine stores and opened six new stores in the six months to December.
Excluding the impact of new stores and store closures, Harvey Norman's sales in the period dropped by 5.3 per cent from the previous corresponding period.
Like-for-like sales in Australia were down by 6.3 per cent, but were up three per cent in New Zealand.
Harvey Norman declared a fully-franked interim dividend of 4.5 cents per share, down from five cents for the same period in the previous year.
Harvey Norman shares closed up 21 cents, or 9.21 per cent, at $2.49.