Retailer Nick Scali reports fall in sales and profit on supply issues and increased property costs

The uncharacteristic retreat in sales and earnings for the typically high-growth Nick Scali business also saw it cut its final dividend payment.

Nick Scali CEO Anthony Scali. The retailer has said trading in Britain was expected to deteriorate further. Picture: Chris Pavlich

Furniture retailer Nick Scali has posted a 20.9 per cent slide in full-year net profit to $80.6m after sales eased 7.8 per cent to $468.2m, as the company faced rising marketing, property costs and warned of worsening trading conditions in its new market, ­Britain.

The uncharacteristic retreat in sales and earnings for the typically high-growth Nick Scali business also saw it cut its final dividend payment as softer conditions in June and July saw a further pull back in sales orders.

Nick Scali, which in April made its highly anticipated move to Britain after buying a struggling furniture chain there, said on Friday that through June and July written sales at its 20 stores there were affected by a combination of tough market conditions, long lead times due to supply chain disruptions, and store refurbishments.

It said trading in Britain was expected to deteriorate further in the first half of fiscal 2025 as disruption increases due to store refurbishments and change in the product range.

The retailer, which has 128 stores spread across Australia, New Zealand and Britain, said sales for June and July continued to be negative, down 1.2 per cent.

Nick Scali was the first major retailer to report its full-year earnings on Friday, kickstarting reporting season for the sector.

Nick Scali has 128 stores spread across Australia, New Zealand and now Britain. Picture: Attila Csaszar

It posted underlying net profit – which excludes the impact of $1.5m of transaction costs for the British acquisition – of $82.1m, down 18.8 per cent.

Gross margins improved by 200 basis points to 65.5 per cent.

In Australia and New Zealand its chains booked sales orders of $47.4m, up 2.4 per cent.

Revenue in the prior year benefited from increased deliveries as the June 2022 order bank reduced, with lead times returning to pre-Covid-19 levels.

As a result, group revenue for fiscal 2024 was 7.8 per cent lower than the prior year and Australia and New Zealand revenue 9 per cent lower than the prior year.

Nick Scali announced a full-year dividend of 33c per share, down from 35c, to be paid on October 17.

In April, Nick Scali announced the purchase of British specialist home furniture retailer Anglia Home Furnishings. Nick Scali said on Friday that the British acquisition added $3.3m to group operating expenses in the second half.

Analysts at Jarden called it a strong result in a tough market.

Jarden has a “buy” recommendation on the stock and a 12-month price target of $15.40.

Nick Scali shares closed flat at $14.82.

“It appears that (Nick Scali) is continuing to take (market) share and margins are likely going to take slighter longer than expected to return to ... guidance range, which suggests to us that they can absorb any freight headwinds in FY25 (estimates)”.

Jarden has a “buy” recommendation on the stock and a 12-month price target of $15.40.

Citi analysts, who also have a “buy” recommendation, have a price target of $17.30.

“Nick Scali in many instances is selling to consumers who have just taken on a mortgage, who are likely to have less disposable income than the younger pre-mortgage customers of Universal, Lovisa, and many of Accent Group’s banners,” Citi analysts said.

Nick Scali shares closed 1c lower at $14.81.

Originally published as Retailer Nick Scali reports fall in sales and profit on supply issues and increased property costs