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Nick Scali share price sinks on warning profits could fall more than 30%

The Nick Scali Limited (ASX: NCK) share price is down 17% in lunchtime trade after the furniture retailer warned “difficult trading conditions” could see fiscal 2020 profit fall more than 30% below fiscal 2019. 

It now expects this fiscal year’s profit to land between $17 million to $19 million compared to $25 million delivered in fiscal 2019. It blamed soft housing markets and sagging consumer confidence for the result and claimed monthly foot traffic at its stores was down 10%-15% on the prior corresponding months. 

The soft consumer spending environment is no secret as Australians tighten their belts on the back of flat to falling house prices extending household balance sheet leverage.

Wages growth is also feeble, with unemployment ticking higher.

Recently, Flight Centre Travel Group Ltd (ASX: FLT) also warned the market Australians were spending less on travel over the second half of 2019. 

The “good news” is that the RBA has slashed interest rates to record lows in an attempt to stimulate spending, while Nick Scali remains a conservative family run company with a strong balance sheet. 

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Returns as of 6th October 2020

Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia owns shares of and has recommended Flight Centre Travel Group Limited. 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 Scott Phillips.

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