Nick Scali has seen a difficult start to the new financial year, with monthly store traffic falling 10 to 15 per cent, reducing same store sales for the period by 8 per cent compared to the prior corresponding period.
According to the Australian furniture business the result is linked to a more general decrease in retail demand seen across the industry, largely associated with the recent housing slump and a more cautious consumer.
“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,” Nick Scali company secretary Christopher Malley said in a statement to investors.
“As a result of these trading conditions, the company currently expects that NPAT for the half-year ending 31 December 2019 will be in the range of $17 million to $19 million, compared to $25 million for the corresponding period in FY19.”
Trading in August was particularly bad for the business, while September saw volatile sales from week to week. October, so far, has been relatively flat.
This result is a continuation of the prior year’s results, when Nick Scali saw 2.8 per cent net profit growth to $42.1 million, compared to the previous year’s 10.1 per cent growth.
With the furniture business’ experiences occurring across its entire network of stores, the decreased traffic lines up with research by the Commonwealth Bank released this week, which found that customer spending intentions had fallen over September.
The latest CBA household spending intentions report found that retail spending had pulled back once more after a rise in August – a sign that record-low interest rates may be impacting stimulus from the Coalition’s increased income tax refund.
“Our view for some time now is that monetary policy changes do little to support household activity,” CBA chief economist Michael Blythe said.
“While a positive ‘wealth effect’ is emerging from rising home prices, consumers interpret rate cuts from record lows as a sign of economic weakness and keep their wallets shut.”
This story originally appeared on Inside Retail Australia.