Three of Australia’s premier retailers are suffering share price falls today despite the wider market pushing slightly higher. Is this a sign of things to come for the consumer discretionary sector?
Nick Scali Llimited (ASX: NCK)
Earlier today, Nick Scali delivered a disappointing trading update to the market stating that store traffic was down by 10% to 15% for the first few months of FY20.
As a consequence, store like-for-like sales were down 8% on the same time last year and management have revised downwards their 2020 first half profit guidance to a range of $17 million to $19 million. At the bottom end of the guidance, this constitutes a significant 32% reduction to previous guidance.
Management blamed cautious consumers and a slow down in the housing market for the poor start to the year. However, the company did hint that conditions may improve in the 2nd half, pointing to a recent pick up in housing activity in the aftermath of recent interest rates cuts and tax cuts delivered back in July.
Shares in the furniture retailer had sunk 17% at lunchtime today before recovering marginally to close the day down 13.75%.
JB Hi-Fi Limited (ASX: JBH)
Without any major news coming out of the company, it seems the JB Hi-Fi share price has been a victim of the collateral damage from Nick Scali’s trading update.
The electronics retailer has been a stellar performer in 2019, with the share price up more than 50%. JB Hi-Fi has continually defied the doomsday predictions from the retail bears, with total sales once again marching higher in FY19 to reach an impressive $7.1 billion supported by 2.8% growth in comparable sales growth.
The presence of Amazon in the Australian market has not yet had much of an effect on JB. However, it is still early days so I think it’s a bit premature to be claiming victory on that front just yet.
At the time of writing, JB is trading just off its session lows, closing down 4.5% for the day.
Harvey Norman Holdings Limited (ASX: HVN)
Just like JB Hi-Fi, Harvey Norman seems to be falling largely due to the negative outlook provided by Nick Scali.
Despite today’s sell off, which has seen the Harvey Norman share price fall by nearly 6%, the company remains one of the best performing retailers on the ASX this year, up more than 25% year-to-date.
Today’s fall pushes Harvey Norman’s dividend yield up above 8%. However, one must be careful about investing based on yield alone. If profits were to fall, or if future expectations were revised down, there is no guarantee the dividend will – or should – be retained at current levels.
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At the time of publishing, Luke has no financial position in any companies mentioned.
