Furniture and appliances retailer Harvey Norman has defended its decision to diversify into dairy farming and cattle breeding, telling shareholders it is confident a $34 million investment in one of Australia's largest dairy farms will deliver returns.

The retailer faced a backlash from investors after revealing on Wednesday it had acquired a 49.9 per cent stake in dairy operator and cattle breeder Coomboona Holdings for about $25 million and had advanced about $9 million to the company.

Retailer and racehorse owner Gerry Harvey is diversifying into dairy farming. Credit:Glenn Hunt

Coomboona owns land and farm assets including dairy farms in the Coomboona district of the Goulburn Valley region in northern Victoria. It also operates a pedigree breeding and genetics business and is well known for its Holsteins.

"It just seems weird," said Australian Shareholders Association spokesman Allan Goldin as Harvey Norman shares fell 16¢ to $4.15.