Nick Scali (ASX:NCK) faces freight headwinds in the first half of fiscal year 2027 as industry data indicates that spot freight rates from China into Australia and New Zealand have risen more than 40% year over year over the past month, Jefferies said in a Tuesday note.

The higher rates are due to capacity constraints caused by container ships continuing to reroute away from the Red Sea and Suez Canal, resulting in longer shipping times, the investment firm said.

Jefferies estimates that a roughly 25% increase in freight rates could result in a drag of about 7% on consensus estimates for Nick Scali's profit before tax for the first half of fiscal 2027.

The furniture retailer may raise prices to partly offset higher freight rates, but this could prove difficult in the current macroeconomic environment and amid a softer housing market.

"Despite management's solid track delivering superior gross margin outcomes, [Nick Scali's] products are skewed to premium-price points and furniture spend is highly correlated with house prices, which are declining, particularly at the high-end," the equity research firm said.

It maintained a hold rating on Nick Scali with a price target of AU$14.