Nick Scali blames difficult trading conditions for slashed profit guidance

Written on the 15 October 2019 by Business News Australia

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.

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