Nick Scali blames difficult trading conditions for slashed profit guidance

Nick Scali blames difficult trading conditions for slashed profit guidance

Australian retail trading conditions have been named as the reason behind Nick Scali's (ASX: NCK) latest profit downgrade.

Citing "difficult trading conditions", listed furniture retailer Nick Scali has downgraded its 1H20 NPAT from $25 million to $17-$19 million.

The group says tough trading conditions experienced in August have continued into the new financial year, with a similar pattern evident so far in October.

Monthly store traffic is down 10-15 per cent during the first three months of FY20, impacting group like-for-like sales, which are currently down eight per cent compared to the same time in 2019.

"The Company believes this is linked to lower general retail demand associated with the recent slowing in housing sales and renovations and a cautious consumer attitude," says Nick Scali.

However, the retailer believes that there are glimmers of hope on the horizon.

"With lower interest rates and signs of improvement in the number of housing transactions recently, Nick Scali believes this may translate to a lift in sales in the second half," says Nick Scali.

"Despite the softer trading conditions, Nick Scali continues to generate positive cashflows, maintains a strong balance sheet, and is continuing to expand its store network, which is a major contributor to long term growth in sales and profit."

Nick Scali finished FY19 with its seventh straight year of record profit, up 2.8 per cent year-on-year at $42.1 million.

Same store sales however were down 1 per cent for the year, but new product initiatives helped strengthen gross margins despite currency headwinds.

The company observed flat same store sales towards the end of the financial year and in July they were negative.

Shares in Nick Scali are down 13.75 per cent to $6.21 per share at 1.53pm AEDT.

Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.

Business News Australia

Help us deliver quality journalism to you.
As a free and independent news site providing daily updates
during a period of unprecedented challenges for businesses everywhere
we call on your support

From pandemic side hustle to multi-million dollar business: Meet Ling Fung
Partner Content
Ask any parent, and they’ll tell you: preparing for a new baby is no easy task.&n...
Metro Baby
Advertisement

Related Stories

Edtech Saasguru scores $4m in seed round led by Square Peg

Edtech Saasguru scores $4m in seed round led by Square Peg

Edtech platform for cloud skills and certification Saasguru has ann...

Is attribution software killing our creativity?

Is attribution software killing our creativity?

As digital marketing continues to evolve at rapid speeds, businesse...

Sonic Healthcare acquires 20pc stake in gut health business Microba Life Sciences

Sonic Healthcare acquires 20pc stake in gut health business Microba Life Sciences

Global medical diagnostics giant Sonic Healthcare (ASX: SHL) has ag...

Legal automation platform Josef secures $5.2 million to lift overseas presence

Legal automation platform Josef secures $5.2 million to lift overseas presence

A Melbourne-based legal software platform that allows lawyers to au...