NICK SCALI SLUMPS DESPITE PROFIT RISE
INVESTORS dumped Nick Scali shares on Monday amid fears that slowing orders would hit long-term earnings.
The stock plunged 13.04 per cent to $10.80, its largest slide in two years, with investors disappointed by the smaller-than-expected interim dividend and lack of profit guidance for the full year. The share pummelling came despite the furniture retailer reporting that revenue soared more than 57 per cent to a record $283.9m over the six months to December 31, which helped to drive a 70 per cent jump in profit to $60.6m. The group announced a 14.3 per cent lift in the interim dividend to 40c a share, which was less than the market expected.
Sales orders for the chain in January were almost 23 per cent above pre-Covid-19 levels and chief executive Anthony Scali remained upbeat about consumer spending, especially in the furniture category.
The furniture group enjoyed a boost to sales and profitability in the first half from its acquisition of PlushThink Sofas.
But analysts took a more pessimistic view of the firsthalf results, pointing to a 26 per cent drop in customer deposits for new furniture against the same time last year and a 33 per cent slide against 2022 as an indicator of easing supply chain delays and slowing demand.
Citi analyst Sam Teeger had pencilled in a 10 per cent fall in like for like sales for the second half, against a 12 per fall in January orders.
“Nick Scali is doing better than expected on gross margins and costs, however it’s possible that the stock could trade down given the slowing topline and the weak start to calendar 2023,” said Mr Teeger.
The retailer said it had anticipated a slowdown compared to the Covid-19 boom yet trading remains better than pre-Covid 19 despite rising interest rates.