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Why the Nick Scali Limited share price soared today

Shares of Nick Scali Limited (ASX: NCK) have bounced this morning after the furniture retail group upgraded its full-year earnings guidance.

Like many other retailers such as Harvey Norman Holdings Limited (ASX: HVN) and even JB Hi-Fi Limited (ASX: JBH) (through its HOME format stores), Nick Scali has benefited from the strong housing market in recent years. For Nick Scali, it seems that trend continued in April with the expectation that such consumer behaviour will continue through to the end of June 2016.

As such, Nick Scali has upgraded its earnings guidance for the year. It expects net profit after tax (NPAT) to be in the range of $24 million to $26 million, compared to its previous guidance of between $22 million and $24 million.

The company’s shares bounced 5.5% to $4.38, while Harvey Norman’s shares also rose 0.8%.

Indeed, Nick Scali could continue to perform strongly in the coming years, especially if interest rates do continue to decline and if the property market remains strong. In saying that, a pullback in the housing market would also be a bad thing for the group, which is something investors certainly need to be aware of.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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