Retailer reports drop in profits

Furniture chain Nick Scali has suffered an uncharacteristic slide in interim profit and kept its dividend flat, although its sales orders improved towards Christmas.

On Tuesday, Nick Scali became the first major retailer to report its December half results and kick off earnings season, with its revenue down 20.2 per cent to $226.6m and net profit down 29 per cent to $43m.

The dividend was kept flat at 35c a share, payable on March 26.

However, the market cheered the retailer’s performance in a tough market and, with the profit also better than forecast when the furniture chain was forced to water down its profit forecasts at its annual general meeting last year, the shares rallied almost 20 per cent.

Nick Scali, which also owns the Plush furniture chain, has been a strong performer for some time, and in August it posted a record full-year net profit of $101.1m for fiscal 2023, up 26.1 per cent, well ahead of expectations of about $96m.

In October at its annual general meeting, chief executive Anthony Scali warned shareholders that sales orders for the first quarter to September were down 5.4 per cent compared to the same period last year and that on a like for like basis group written sales orders were down 6.7 per cent. In-store traffic slowed by as much as 15 per cent in that quarter.

The market was handed earnings guidance for the first half of $40m to $42m, with the December half results released on Tuesday slightly above that range.

“Written sales orders were solid for the period, with strong improvement in the second quarter over the prior corresponding period,” Mr Scali said on Tuesday.

Mr Scali later said he believed the stage 3 tax cut changes would boost consumer spending and confidence.

“It is like a pay increase, isn’t it?” he said.

“It’s like your wage going up.”

Mr Scali said the improved sales in January was across his category range.