Nick Scali has posted a profit slide and slashed its dividend

Nick Scali has warned of volatile trading conditions with its newly bought British furniture chain ringing up losses but showing promise as shoppers in the UK warm to the brand.

Anthony Scali, CEO of Nick Scali. Picture: Hollie Adams/The Australian

Furniture chain Nick Scali has suffered a one third slide in its first half profit and sliced its dividend as volatile trading conditions in Australia and New Zealand hampered growth and the losses flowing from its recently bought British chain weighed on earnings.

Nick Scali said that its losses and poorer sales at its Fabb Furniture chain were mostly driven by disruption caused by store closures as it refurbishes the stores in preparation for rebranding to the Nick Scali logo, while stock clearances to empty warehouses of Fabb branded furniture also impacted the result.

But the company was seeing some immediate improvements from the British business as Fabb stores transitioned to Nick Scali, with four stores refurbished and rebranded as Nick Scali in the first half, reopening on Boxing Day, with expected gross profit margin on the Nick Scali product to be 57 per cent to 59 per cent compared to the Fabb gross margin of 41 per cent at acquisition.

That store refurbishment program would continue into the second half as customers warmed to the Nick Scali brand in Britain.

“Re-branded Nick Scali UK stores were the top three performing UK stores in January 2025 for written sales orders, only one of which was in the top five under Fabb,” said Nick Scali managing director Anthony Scali.

“Our aim is to complete the refurbishment and rebranding of a further 8 stores by 30th June 2025. The top selling Nick Scali sofa in Australia and New Zealand is now the top selling sofa in our UK Stores. This supports our belief that the Nick Scali product range will appeal to UK customers.”

But the furniture retailer warned that trading conditions continued to be volatile. In Australia and New Zealand sales orders in January were up 8.5 per cent and up by 5 per cent in the first week of February, against sales growth of 4.2 per cent in December

On Friday Nick Scali kicked off the reporting season to be the first major national retailer to reveal its performance over the December half, posting a 10.8 per cent lift in half-year revenue to $251.07m. Profit fell 30.2 per cent to $30.04m, with its Australia and New Zealand stores trading better than expected but its newly bought business in Britain struggling to report a loss.

It also cut its interim dividend. Nick Scali posted an interim dividend of 30c per share, down from 35c, payable on March 26.

The company said underlying net profit after tax for Australia and New Zealand was $36m, above the $30m to $33m profit guidance provided at the AGM. The arm reported a net profit of $34.1m. During the half a one-off expense of $2.8m was incurred from extensive detention and demurrage fees caused by the appointment of a liquidator to its main freight forwarder, restricting access to containers and the furniture destined for customers for several weeks. Group revenue for its Australia and New Zealand operations was $222.5m, down 1.8 per cent.

At its UK arm it reported an underlying net loss of $2.8m, lower than the $3.3m to $3.8m loss guidance provided at AGM. The statutory UK net loss after tax was $4.1m, lower than the $5.1 to $5.9m loss guidance also provided at the AGM.

UK written sales orders of $19.4m were significantly impacted during the period particularly in the second quarter fiscal 2025, from the disruption to the business caused by stores closed for refurbishment and the Fabb product range being cleared from showrooms and warehouse inventory. UK gross margin was 45.1 per cent versus 41 per cent pre-acquisition, the company said.