Nick Scali dividend back after sales rebound

Furniture retailer Nick Scali will be paying a reinstated dividend by the end of the month after a sales rebound in May and June.

New Nick Scali says sales rebounded strongly in May and June after an initial coronavirus slump.

Furniture retailer Nick Scali recorded a strong rebound in its sales over May and June following a dive in the early months of the coronavirus pandemic and will be reinstating its deferred interim dividend and paying it by the end of the month.

On Friday morning Nick Scali issued a trading predicting the revival of sales momentum since May would help it post a 15 per cent to 20 per cent increase in its second half profit.

In February Nick Scali was one of the first retailers to report that the then emerging coronavirus health issue in China had disrupted its supply chain.

Soon after the virus hit Australian shores the company decided to defer its interim dividend.

But on Friday Nick Scali said in an ASX statement that sales had started to improve as health practices were put in place and its stores were reopened.

The furniture chain said for the fourth quarter to date, sales order growth was 20.4 per cent and second half sales order growth was 7 per cent. Second half net profit is expected to be up 15 per cent to 20 per cent on the second half of 2019.

Nick Scali said fiscal 2020 revenue was expected to be in the range of $260m to $263m and full year underlying net profit expected to be in the range of $39m to $40m.

The improving performance meant Nick Scali would bring forward the payment of its deferred interim dividend, the company said.

On March 23 the Nick Scali board decided to defer the payment of the 25 cents interim dividend until October 2. “In light of strong recent trading and a significant increase in the sales order bank, the Board have decided to bring forward the payment of the previously deferred interim dividend to 29 June 2020,” the company said.

The significant decline in sales orders during the second half of March and the first half of April, when the showroom network was affected by closures, meant that approximately $9m to 11m of sales were unable to be recorded in the current financial year, Nick Scali said.

“However, due to the successful implementation of a range of cost reduction initiatives across marketing, employment and property, together with government assistance, profit for the second half will be up 15 per cent to 20 per cent on last year,” the company said on Friday.

“Nick Scali has experienced a significant rebound in customer activity during May and the first half of June. Given the strong trading, the company expects sales orders for the months of May and June to be up 54 per cent on prior corresponding period, driven by the easing of government restrictions and a reallocation of discretionary consumer spending toward furnishings and homewares.”

Given the nature of Nick Scali’s business model and the significant increase in sales orders during May and June, the retailer anticipates sales revenue for the first quarter of 2021 to be approximately 30 per cent up.

This is expected to underwrite profit growth for the first half of fiscal 2021.