Nick Scali profits double as online sales spike six-fold

Furniture retailer Nick Scali (ASX: NCK) has doubled its net profit after tax (NPAT) for FY21 to reach $84 million, exceeding guidance by 5 per cent thanks to a significant reduction of expenses despite rising freight and supply chain costs.

Expenses as a share of sales were down by more than eight percentage points at 30 per cent, which meant a greater part of its 42 per cent sales hike could be pocketed as profit.

"The most pleasing aspect of our FY21 result, was the ability of our distribution network across Australia and New Zealand to deliver the materially elevated sales revenue whilst maintaining the same level of costs as FY20," says managing director Anthony Scali.

This was buoyed in part by the opening of three new showrooms in Bennetts Green (NSW), Maribyrnong (Victoria) and Wairau Park (New Zealand), all performing above expectations for the Sydney-headquartered group.

Nick Scali's expansion played an important role in today's result because same-store growth was not as quick as for the group overall, at 34 per cent.

But most eye-catching is the online boost for this traditional bricks-and-mortar retailer, which in the previous financial year had only recorded an earnings contribution of around $600,000.

In FY21 the online segment's earnings surged by a multiple of almost 15 times to $8.8 million. This only represents 7 per cent of earnings before interest and tax (EBIT), but the channel accounts for 13 per cent of EBIT growth.

This was boosted by a six-fold rise in online written sales orders to $18.3 million.

The group opened another showroom in Hastings, New Zealand in July, but lockdowns in Greater Sydney, Victoria and South Australia affected trading in that month.

Written sales orders were down 27 per cent compared to July 2020, but up 24 per cent on the same month in 2019 despite Greater Sydney being locked down for the whole month.

Nick Scali reports Victoria and South Australia have traded exceptionally well since having come out of lockdown towards the end of July. Online growth was still up by 88 per cent year-on-year in July this year.

New Zealand continues to perform well with written sales orders for July up 91 per cent, underpinned by the recently opened new stores and like for like sales growth of 10 per cent.

"The Company's future growth will primarily be driven by the continuation of the store rollout and increasing online penetration," the company said.

"Despite the buoyant trading conditions, there is a high degree of uncertainty in the current retail environment, due to current and potential future lockdowns, supply chain challenges caused by lockdowns in sourcing countries, as well as the continuing escalation of global shipping costs.

"Therefore, at the current time, it is not possible to provide profit guidance for the company for the first half of FY22."

Earlier this year Nick Scali announced it would be paying back its $3.57 million received in JobKeeper payments in the first three months of FY21, which after tax amounted to a $2.47 million voluntary return to the Federal Government.