(Yicai Global) July 18 -- Red Star Macalline Group and other Chinese home furnishing companies are bracing for a sharp drop in profit and even losses in the first six months from the same period last year as the country’s interior decorating market feels the fallout from a depressed property sector.

Red Star Macalline, which operates home furnishings shopping malls, expects net profit to plunge between 83.9 percent and 86.8 percent in the six months ended June 30 to between CNY135 million (USD18.8 million) and CNY165 million, the Shanghai-based company said in its latest earnings report.

The shopping mall occupancy rate declined in the first half due to weak demand, Red Star Macalline said. Less income from rents and management fees resulted in lower revenue from its leasing business, it added.

Qumei Home Furnishings Group expects to rack up losses of between CNY108 million (USD15 million) and CNY160 million in the first six months, compared with the profit of CNY125.5 million it made in the same period last year, the furniture maker said in its most recent financial report.

Qumei’s gross profit margin was hammered due to a jump in the price of raw materials, the Beijing-based company said. The firm also incurred additional one-time costs as its overseas unit Ekornes upgraded its Asia-Pacific supply chain and merged factories in Vietnam and Thailand, resulting in a big hike in compensation payments to laid-off employees.

But some did better than expected. Markor Home Furnishings said it anticipates its losses to more than halve in the first half from a year earlier to between CNY76 million (USD10.6 million) and CNY95 million.

People are still unwilling to spend on interior decorations, given the bleak real estate market, Markor said. The global economy is facing a slowdown in growth and inflationary pressure, which is affecting the Urumqi, northwest Xinjiang Uyghur Autonomous Region-based company’s international wholesale business and revenue.

China’s home decor sector is in a state of contraction, according to US market research firm Frost & Sullivan. The size of the market shrunk to CNY2.9 trillion (USD404.6 billion) in 2022 and it posted a compound annual growth rate of minus 0.3 percent from 2017 to 2022.

Even if the real estate market improves this year, it will be difficult for interior decoration companies to recover, the California-based firm added.

Editor: Kim Taylor