Market says thank you to bullish Scali update

Company News

by Glenn Dyer

Shares in furniture retailer Nick Scali (ASX:NCK) were up more than 11% at one stage yesterday after the annual meeting heard a very bullish update on how the company has started 2022-23 with a rush of sales and earnings.

CEO Anthony Scali told shareholders that the company had seen a 74% surge in revenue in the four months to October to $194 million, as he predicted a 57% to 66% leap in net profit after tax for the December half.

He said the surge reflected the impact if the extra sales from the Plush chain which has helped the company maintain deliveries at the record rate achieved in the June quarter of 2021-22.

Nick Scali shares ended up 9.5% at $10.23 after touching a day’s high of $10.51.

“October year to date sales revenue is 74% above the same period in the prior year, which was before the Plush acquisition in November 2021,” Mr Scali said.

“Group margin for the four months improved 180 basis points to 61.3% versus the 59.5% reported for the second half of FY22, following the Plush acquisition in November 2021. We expect gross margin to continue to improve over FY23 with further realisation of the Plush synergies,” Mr Scali told shareholders.

He said group written sales orders for the four months were $148 million, “55% above the prior year, with the strongest trading months being July and October. Nick Scali brand written orders were 21.7% above the first four months of the prior year and 35% above the pre Covid 19 FY20 year.”

“Final net profit after tax for the first half will depend on actual deliveries achieved before the end of December, including the risk of any future unknown external impacts affecting our distribution operations.

“Based on current delivery levels we expect net profit after tax for the first half of FY23 to be in the range of $56 to $59 million, 57% to 66% above the first half FY22 of $35.6 million.”

But as upbeat as the current sales situation is, Mr Scali refused to provide any guidance for the full year to June 30, saying “uncertainty on future near term levels of demand remain in the current economic environment.”

He also told the meeting the company’s expansion plans remain on track with six new outlets due to be opened this financial year.

“The acquisition of Plush expanded our store network by 46 stores and during the year a new Nick Scali store was opened in Hastings, the first regional store in New Zealand.

“The combined store network of 108 across Australia and New Zealand provides the company with additional opportunity for growth. We maintain our long-term target of at least 85 Nick Scali stores and 90-100 Plush Stores.

“In FY23 we intend to open a minimum of two new Nick Scali stores and four new Plush stores.

“In the first half of FY23 we are opening one new Nick Scali store in Helensvale Queensland, and two new Plush stores in Capalaba Queensland and Campbelltown New South Wales.

“We are continuing our strategy of owning more of our retail stores and in FY22 we acquired a multi-purpose site in Townsville to relocate our existing Nick Scali showroom and to provide a new distribution centre to support growth of both brands in regional Queensland.”

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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