Nick Scali shares hit record highs as first-half profit rockets

The furniture retailer now expects to pocket twice as much as it did the same time last year thanks to surging demand and improved supply.

Customer Stephanie Bellm and assistant store manager Kevin Parkinson at Nick Scali Fortitude Valley. Picture: Liam Kidston.

Shares in furniture retailer Nick Scali hit record highs on Tuesday after the company lifted guidance for a second time, saying it now expected its underlying profits for the first half of the financial year to double last year’s result.

In a release to the ASX on Tuesday the company said unaudited net profit after tax for the six months to December 31 2020 was expected to be $40.5m, up 100 per cent on the previous comparable period.

Profit for this period was previously forecast to be 50 to 60 per cent higher in August and 70 to 80 per cent higher in October.

The announcement sent shares in the retailer soaring 9.3 per cent to an intraday high of $10.81, before paring gains to close at $10.51, up 6.3 per cent.

The company said the result was underpinned by a better than expected container availability which allowed the shipping of enough products to meet a resurgent demand for home furnishings – total written sales were up 45 per cent in the first quarter and 58 per cent in the second quarter.

The second quarter’s result was boosted by the reopening of stores across metropolitan Melbourne as well as a successful “Black November” sales drive in store and online.

With all stores now reopened, plus the addition of two new locations – one in New Zealand and one in NSW – total written sales for the six months to December 31 ended up $20m higher than expected with the sales book hitting a record high on New Year’s Eve.

“This is expected to translate to material revenue and profit growth in the second half of the financial year, subject to there being no further disruption to the store network or supply chain,” the company told the market.

Nick Scali has been one of the retailers to benefit from a surprise bump in home improvement spending throughout the COVID-19 pandemic.

Despite realising a flat full year profit of $42.1m in August last year, surging sales figures in the final few months signalled to the market that Australians were prepared to spend on furniture to improve their work from home experience.

Shares in the company spiked 15 per cent after the profit was announced and have continued to grow since, representing a gain of 54 per cent year to date.

Chief executive and managing director Anthony Scali in August said he expected sales momentum to last while people were prevented from travelling overseas and economic sentiment remained generally positive.

“Our view is people are spending a lot more time at home, they also spend a lot of money on their holidays which they can’t do now, particularly our customers in our demographic I think, being a little more affluent,” he said.

“So it is a reallocation of their spend I think, and the realisation they are going to be spending more time in their home and less time out of their home for a while.

“And when we looked at the government stimulus it certainly gave confidence to people they may not be losing their jobs, but I was still surprised how people reacted or were not so concerned about their jobs or the uncertainty going forward.’’