Nick Scali’s shares surge after furniture retailer beats first-half profit forecast

Nick Scali’s shares surge after furniture retailer beats first-half profit forecast

Photo via Nick Scali Facebook

Furniture retailer Nick Scali (ASX: NCK) has surprised the market with a better-than expected profit for the six months to the end of December, sending the company’s shares almost 16 per cent higher in the first hour of trading.

Nick Scali has posted a net profit after tax (NPAT) of $43 million for the first half of FY24, which was just above its target range of between $40 million and $42 million.

While the result is still 29 per cent lower than a year earlier, investors were buoyed by news that written sales orders gained momentum in November and December with orders for the second quarter of the current year 8.2 per cent higher than the second quarter of FY23.

Shares in Nick Scali hit a high of $13.91, up $1.90, within the first hour of trading following the profit announcement.

The half-year result was built on revenue of $226.6 million, down 20.2 per cent from a year earlier, but supported by an improved gross margin of 65.6 per cent, up 3.6 percentage points.

Revenue in the previous corresponding period saw higher due to a spike to a post-COVID spike in orders at the end of FY22 which were delivered during the period.

“Written sales orders were solid for the period, with strong improvement in the second quarter over the prior corresponding period,” says Nick Scali’s CEO Anthony Scali.

“Efficiency on both gross profit margin and operating costs contributed to an NPAT outcome that of $43 million slightly ahead of the guidance provided at the October 2023 AGM.”

The result has also helped Nick Scali maintain its interim dividend steady at 35c per share, fully franked.

Nick Scali expanded its store network during the December half with the opening of two new Plush outlets at Helensvale on the Gold Coast and Payneham in Adelaide, although one Plush store also was closed during the period.

The company acquired sofa merchant Plush Think-Sofas and its 46 stores for $103 million in 2021. The store network now sits at 44, with 20 of them now transformed into a new concept launched in December 2022 – including 11 in the latest half-year.

Nick Scali also opened a larger Payneham store to replace the company’s existing branded store in the suburb which has since been converted into a clearance centre.

The company says sales momentum has continued into the new year with January’s written sales orders of $58.9 million, up 3.6 per cent over the same time last year.

Like-for-like orders are up 2.6 per cent which the company says reflects continued positive momentum from the second quarter of last year.

Nick Scali shares were trading at $13.78, up $1.77, at 10.53am (AEDT).

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