By Emma Koehn
The boss of furniture retailer Nick Scali says strong employment is helping buoy consumer spending on big-ticket items, leaving the company in a better position than it was before COVID-19 despite the cost-of-living crunch hitting Australian households.
The ASX-listed homewares business reported a jump in first-half profits of 70.2 per cent to $60.6 million, while revenues were up 57.4 per cent to $283.9 million.
Chief executive Anthony Scali told analysts on Monday morning that trading was stronger than expected in January. “We had anticipated a slowdown compared to the COVID-19 boom, yet trading remains better than pre-COVID,” he said.
The impact of rising interest rates had not yet dampened consumer confidence in the way that many expected, he added.
Nick Scali Furniture chief executive Anthony Scali.Credit: Louie Douvis
“One reason is the low unemployment rate and a significant increase in wages and salaries.”
Despite optimism about the outlook, Nick Scali brand furniture sales orders declined by 3 per cent for the half when compared to the same time last year, when demand peaked after the lifting of retail lockdowns.
The stock slumped on Monday as investors digested the earnings numbers and the company’s dividend of 40¢, which came in below some analysts’ expectations.
The business also declined to provide guidance for full-year numbers, saying its performance would depend on the strength of trading conditions between February and April. That decision appeared to spook investors who sent shares down 13.5 per cent to a low of $10.73 just after 1pm.
Nick Scali was the first retailer to report its December half-year results, making it a bellwether for other retailers. The company’s 40¢ interim dividend was up by 14.3 per cent on last year, but was slightly below market expectations.
It is also working to refurbish its Plush store network, which includes more than 40 stores, after buying the business in 2021 in a deal worth $110 million.
Scali said Plush stores had not been well presented when the company bought the company and it was now investing heavily in new store fit-outs to entice customers.
“It will make a material difference on the profitability of Plush over time ... we plan to refurbish four stores a month.”
The company said on Monday that freight prices had come off their pandemic peaks, and Scali noted the business had been able to reduce the price of some furniture items by between 5 and 10 per cent over the past few months.
Analysts are cautious about the outlook for furniture and home goods because of inflationary pressures and the possibility of another rise in the official cash rate this week.
Australian Bureau of Statistics figures on retail trade volumes updated on Monday show the volume of retail sales declined by 0.2 per cent across all industries in the December quarter.
This is the first time quarterly volumes have fallen since September 2021, though analysts were expecting a larger drop of 0.5 per cent.
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