Popular furniture retailer Temple & Webster Group Ltd (ASX: TPW) hit a new 52-week high share price on Thursday amid Australian property values continuing to appreciate in the new year.
Harvey Norman Holdings Limited (ASX: HVN) and Nick Scali Limited (ASX: NCK) shares also smashed new 52-week highs today amid the S&P/ASX 200 Index (ASX: XJO) gaining 0.30%.
The Temple & Webster share price hit a new 52-week peak of $9.93 in intraday trading today. Nick Scali shares went to $15.20 apiece, and the Harvey Norman share price reached $4.65.
All three ASX retail stocks have increased substantially over the past six months by 48%, 39%, and 23%, respectively.
The 52-week highs come two days after the Reserve Bank (RBA) announced it was keeping interest rates on hold after its first board meeting for 2024.
Image source: Getty Images
How interest rates are impacting shares vs. property
Earlier in the week, we discussed how the changed outlook on interest rates was turbocharging shares vs. property in 2024.
We noted that ASX shares enjoyed a super-strong Santa Rally over November and December. This was driven mainly by surging US stocks due to optimism that the Federal Reserve would cut rates in 2024.
Then the ASX 200 hit a new record high last month after December quarter inflation came in lower than expected.
We also noted how unusual it was to see home values rising so strongly over 2023 when interest rates were still moving up. Traditionally, rising rates tamp down home values.
This strength in the property market appears to be continuing in 2024.
Firstly, there was more price growth in January. Then we saw a preliminary auction clearance rate of 74% on the first major auction day of the year.
Why has the property market been so strong?
Well, a lower-than-average number of homes for sale in many markets has definitely been a factor.
But more interestingly, there was more buying activity among cash buyers last year. Cash property buyers are obviously wealthy and therefore less impacted by rising rates and inflation.
People who buy homes with cash are typically one of three buyer types.
Foreigners buying a second family residence or investment. Expats returning home after making their fortunes overseas in low-taxing countries. Downsizers who have sold their family home and are purchasing a smaller property for retirement.
Why are these 3 ASX furniture retailers hitting new highs today?
We know there's a correlation between how often Aussies buy furniture and how often they move house.
We also know that rising home values create a 'wealth effect' that can make people feel richer. This encourages them to buy discretionary goods and services that improve their lifestyles.
But at the same time, we have a cost-of-living crisis occurring in Australia. Not many middle-income families with mortgages are feeling wealthier right now. This is because their home loan repayments have risen faster than their home values, not to mention the cost of every household item has gone up.
During periods of high inflation, lower and middle-income households rein in their discretionary spending. This was probably a factor in luxury furniture seller Nick Scali revealing a 20% revenue dive and a 29% fall in net profit after tax (NPAT) for 1H FY24 earlier in the week.
But do you know what the Nick Scali share price did in response to these numbers?
It skyrocketed by 19.65% in one day to a (then) 52-week high of $14.37, which has been superseded today.
Why did that happen?
Well, the share market tends to look at what's ahead of it rather than what's behind it. So, maybe investors rushed to buy Nick Scali shares because they liked what they saw in the early sales numbers for 2H FY24.
Nick Scali said January written sales orders were up 3.6% on the previous year and noted this was "continuing the positive momentum of Q2 from the first half FY24".
Perhaps investors are also positioning themselves in oversold retail stocks because they expect inflation to fall further and the RBA to start cutting rates later this year, as all of the Big Four banks predict.
Nick Scali was the first of this trio of ASX furniture retailers to report this earning season.
Temple & Webster will report next Tuesday, 13 February.
Harvey Norman has not yet announced a date for its 1H FY24 report. However, the company usually releases its numbers late in February.
