A big shift in consumer spending habits has helped furniture retailer Nick Scali (ASX: NCK) to a near doubling of first-half profits to $40.6 million.
The result, which was partly buoyed by JobKeeper payments, rent concessions and a reduction in product discounting, was 89.7 per cent higher than a year earlier and almost matched the company's full-year result for FY20 of $42.07 million.
The result could have been stronger but for constraints in Nick Scali's supply chains as sales revenue for the half surged 24 per cent to $171.1 million.
Nick Scali reported written sales orders of $191.1 million, an increase of 52 per cent on the previous year, with the order book hitting a record high by the end of December.
JobKeeper and rent concessions bolstered the company's bottom line by $4 million, supporting a $5.55 million fall in operating expenses.
The result was also achieved despite the company closing 11 stores in Melbourne for three months during the half-year.
"The first half of financial year 2021 had many challenges to navigate including government mandated store closures, supply chain issues and significant delays experienced with global shipping providers," says managing director Anthony Scali.
"Despite these events, the team was able to capitalise on shifting consumer spending patterns and deliver a record result for the company."
Although dominated by a bricks-and-mortar model, Nick Scali also reported a spike in online sales, reflecting the general growth of digital engagement reported by many ASX-listed companies in 2020.
Hard on the heels of buoyant figures from online furniture retailer Temple & Webster (ASX: TPW) this week when it revealed a 556 per cent increase in EBITDA to $14.8 million, Nick Scali says it is well on its way to beating its forecast online profit target for the full year.
Nick Scali recorded $8.8 million of written sales orders online, leading to a $3.5 million contribution to EBIT. The company is now on track to "significantly exceed" its $4 million EBIT target from online sales in FY21.
Nick Scali sees further growth in online sales across its network, with plans to develop a new online offering for the New Zealand market.
The furniture retailer managed to open two new stores during the half year and expects to open another two in the current half.
Meanwhile, the sales momentum continues into 2021, with Nick Scali reporting its largest ever month of written sales orders in January, up 47 per cent from a year earlier. New Zealand was even stronger with sales orders up 130 per cent.
The big challenge for Nick Scali is to deliver the stock on order to convert this into sales revenue.
"The rate of sales revenue growth has been lower than sales orders due to the extended lead times caused by delays in raw materials to our suppliers and shipping issues," says the company in its half-year report.
"These supply chain delays make it difficult to accurately predict sales revenue growth for the second half."
Nick Scali is paying an interim dividend of 40c a share, up from 25c a share a year earlier.
Shares in NCK are up 0.85 per cent to $10.69 per share at 11.18am AEDT.
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