Key points
- Supply chain issues and shipping costs are in focus for ASX retail shares
- Furniture retailer Nick Scali warns the rising cost of shipping could impact profits
- Both major retail indexes are down for the month but recovering this week
ASX retail shares could face a big issue in the trading period ahead and we'll likely hear about it this earnings season.
The S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) has fallen by 10% in the past month. However, it has climbed 2% this week. The S&P/ASX 200 Consumer Staples Index (ASX: XSJ) has fallen 9% over the month and is up 0.66% this week.
Let's take a look at what could impact ASX retail shares in the trading period ahead.
What could impact ASX retail shares?
Furniture retailer Nick Scali Limited (ASX: NCK) is warning of the impact of rising shipping costs and supply chain delays on profits.
The Nick Scali share price climbed 0.83% yesterday on the back of the company's first half-year results for 2022. The company announced a 35 cents per share interim dividend. In today's trade, Nick Scali shares are down slightly by 0.07% to $14.53.
International COVID-19 lockdowns, including in Vietnam, had an impact on the company's suppliers according to the retailer's directors' report.
The report stated:
The group's supply chain has been severely impacted by the pandemic, with overseas manufacturers operating under government constraints in the supply of raw materials and shipping container ability being significantly impaired.
Whilst the Group's suppliers have recently reinstated normal lead times, shipping costs and the availability of containers remains uncertain, and therefore supply chain delays may persist for the remainder of the financial year.
Will shipping costs and supply issues also affect other retailers? We'll likely find out this earnings season, with other big-name retailers due to report soon. They include JB Hi-Fi Limited (ASX: JBH), Kogan.com Ltd (ASX: KGN), City Chic Collective Ltd (ASX: CCX), and Adairs Ltd (ASX: ADH).
Other ASX retail shares include Australian Pharmaceutical Industries Ltd (ASX: API) and Wesfarmers Ltd (ASX: WES). There's also Harvey Norman Holdings Limited (ASX: HVN), Coles Group Ltd (ASX: COL), and Woolworths Group Ltd (ASX: WOW). Many of these companies will be announcing their earnings results soon.
Commenting on the outlook, Nick Scali stated that shipping costs could impact profits in the second half of FY22:
Whilst the group continues to expect revenue to increase materially during the second half, the costs of shipping could well impact profitability during the period.
In recent times, retail outlet supplies have also been impacted due to worker shortages amid the Omicron outbreak.
