Nick Scali posts $110m profit gains as delivery times improves
The delivery times for furniture to customers and better profit margins on couches, chairs and tables has helped Nick Scali post better than expected profits for 2023.
Nick Scali boss Anthony Scali says delivery times for customers have snapped back to pre-Covid-19 levels, quickly turning orders into banked sales, but unprecedented economic uncertainty due to higher interest rates and prices was creating an unstable trading environment.
Mr Scali said many shoppers had been “spooked” by the more than 12 months of rising interest rates, despite strong employment levels and many people having healthy savings.
“It is very volatile, so you have some really bad months where consumers are spooked by the higher interest rates and then you have a good month like we have seen in June and July,” Mr Scali said.
Reflecting that volatility, Nick Scali revealed that June was a strong finish to the 2023 financial year, with group written sales orders of $51.5m, up 4.5 per cent on June 2022. But July 2023 orders of $39.7m were down 8.1 per cent, cycling off a strong July 2022.
“Savings are up, the banks are saying savings are up, as I was reading the CBA result,” he said. “It is more the sentiment. I don’t think people are worried about losing their job but more worried about interest rates.”
The furniture retailer underlined the strength of its retail model at a time when challenging economic conditions are hurting discretionary retailers.
The company on Friday posted a record full-year net profit of $101.1m, up 26.1 per cent, well ahead of market expectations of about $96m.
Nick Scali, the first major national retailer to report its results in the current earnings season, said improved delivery times to customers, the addition of its recently acquired Plush-Think Sofas business and higher margins from improving supply chain synergies had bolstered its performance over fiscal 2023.
“We had problems with shipping – there were massive problems getting containers and shipping — but there are no more delays … we were able to now ship a lot more and catch up, and then the new orders had shorter lead times and revenue was up because of that,” Mr Scali said.
He said lead times from orders to delivery were now 10 to 12 weeks, roughly in line with timing before the pandemic. Nick Scali said revenue for fiscal 2023 rose 15.1 per cent to $507.7m.
It declared a flat final dividend of 35c per share to take total dividends for the year to 75c, up 7.1 per cent from the payouts in 2022. The final dividend will be paid on October 18.
Group gross margin of 63.5 per cent improved 2.5 per cent on 2022, primarily due to margin improvement for Plush, as acquisition synergies were realised through combined group product sourcing and reduced freight costs.
Nick Scali in October 2021 announced a deal to buy rival furniture store Plush for $103m, with the purchase to almost double its then portfolio of showrooms across Australia and New Zealand to more than 100 and deepen its exposure to furniture and home furnishings, one of the hottest sectors in the economy during the Covid-19 pandemic.
Nick Scali said group written sales orders for the period were $437m, representing a reduction of 7.8 per cent on the prior year. First-half written sales orders were $210.3m and second half written sales orders $226.7m.
Mr Scali said the completion of integration of the Plush business would improve performance.
“In fiscal 2023 we completed the full integration of the Plush operations and processes, with the sales order process the last key process to be integrated in December 2022.
“Our Plush refurbishment program is well under way with new and improved product, image and store appeal to customers.
Nick Scali ended the year with 64 stores across Australia and New Zealand and 43 Plush stores in Australia.
Shares in Nick Scali closed 13.3 per cent higher at $12.12.
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