By Emma Koehn
Pockets of strength across Australia’s retail sector have been on show as company earnings season begins, with fashion and furniture retailers surprising the market with stronger than expected results despite many consumers tightening purse strings.
Shares in furniture retailer Nick Scali and online designer brands platform Cettire soared this week after revealing their numbers to investors, with both brands happy with consumer demand for their products despite the broader macroeconomic environment.
Shares in Nick Scali rose by 10 per cent, although boss Anthony Scali said there may be some consolidation in the household goods sector ahead.Credit: Louie Douvis
Nick Scali boss Anthony Scali said trading across the company’s stores was volatile in the second half of 2023, and noted on a call with analysts that trading conditions were becoming more difficult across the household goods sector, particularly for smaller brands.
“I expect if things remain as volatile as they are, there might be some consolidation over the next 12 months of the furniture industry,” he said.
But the company’s shares popped on Friday morning, rising by 10 per cent after the business revealed a net profit after tax of 26.1 per cent to $101.1 million for the 2023 financial year. Revenue was up by 15 per cent to $507.7 million.
Burberry is among the designer brands sold on the Cettire platform.Credit: Getty
The numbers beat market expectations. Analysts have long been predicting a more dire outlook for furniture sellers, as household goods become the first big-ticket purchases on the chopping block for households.
Nick Scali said its orders for July were down on the same time last year, declining by 8.1 per cent for the month to $39.7 million. However, Scali said the business had seen strong foot traffic in June and July, and June orders were up on last year – a fact the company acknowledges is tough to explain given the difficult trading conditions.
Meanwhile, shares in designer fashion platform Cettire cheered the company’s numbers on Thursday when the online retailer revealed it had recorded a 98 per cent jump in sales revenue, to $416.2 million, and had swung to a net profit of $16 million.
Chief executive Dean Mintz sold down an 8.7 per cent stake in the business worth close to $100 million on Thursday night.
“In response to strong investor demand, undertaking this share sale provides enhanced liquidity and free float, improving the likelihood of achieving major index inclusion in the short to medium term,” he said in a statement to the ASX on Friday.
Other parts of the retail sector provide evidence that households are continuing to cut back on everyday purchases. Shares in infant retailer Baby Bunting declined at the open before recovering to land 1 per cent stronger on Friday afternoon after the company’s acting chief executive, Darin Hoekman, said cost of living pressures were impacting how much new parents were spending.
He said parents were “trading down” to more budget-friendly purchases, including hunting for more budget options for even the most essential items such as baby car seats and prams.
“There has been a moderate reduction in the average spend on those items,” he said.
The company recorded a 49.5 per cent drop in net profit after tax for the 2023 financial year, coming it at $9.9 million.
Baby Bunting has declared a 4.8 cents fully franked dividend, payable on September 8. Nick Scali’s final dividend is 35¢ a share, fully franked and to be paid on October 18.
Investors will get a better picture of the health of the retail sector from next week, when larger companies report their 2023 financial results, starting with JB Hi-Fi on Monday.
Analysts say they will be looking closely for any commentary about the consumer outlook and costs for the rest of this year.
“Given the slowing consumer, trading to start financial year 2024 is the key area of focus, even if the second half of the 2023 financial year has been better than expected,” UBS analysts said in a note to clients.
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