Furniture retail leader Nick Scali [ASX:NCK] announced its financial results for the year ending 30 June, showcasing remarkable growth and resilience despite a volatile market landscape.
The company reported an impressive net profit after tax (NPAT) of $101.1 million, up 26.1% from FY22.
This performance was driven by smart strategic initiatives, acquisition synergies, and operational efficiencies throughout the year.
Nick Scali saw its shares jump by 14.5% today, trading at $12.25 per share, after reporting healthy FY23 results that surpassed expectations and accounted for most of the stock’s growth in the past year.
NCK shares are up 21.7% in the past 12 months, which put it well above the sector’s performance by approximately 15%.
Source: TradingView
Nick Scali’s earnings report
Nick Scali reported record profits this morning for FY23 and healthy growth in sales and margins despite a challenging trading environment.
The furniture company saw a 15.1% increase in revenue, reaching $507.7 million compared to the previous year’s figure of $441.0 million, thanks to increased deliveries and reduced lead times back to pre-COVID levels.
This year’s earnings also included a full 12 months of revenue from Plush-Think Sofas, which NCK acquired at the end of 2021 for $110 million, helping bolster its numbers.
The company’s gross margins improved by 63.5%, compared to 2.5% in FY22.
The increase was attributed to the success of combining Plush store sourcing and freight costs with the larger company.
Net profit after tax increased by 26.1% for NCK to $101.1 million, a new record.
NCK said profits were bolstered by a solid increase in sales of 15.1%, thanks to a website store revamp that saw online sales grow by double digits.
Commenting on the result, the Managing Director, Anthony Scali, said:
‘Revenue in the year has been underpinned by the efforts of our Logistics team who were able to manage the peaks of product inflows enabling our lead times to customers to reduce as shipping delays eased.
‘In FY23 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 programme is well under way with new and improved product, image and store appeal to customers. Trading during the year has been variable and challenging as consumer sentiment deteriorated in line with interest rate increases.’
The drop in sales during the final six months to 30 June reflected the souring consumer sentiment mentioned.
Orders were down 16.2% on the prior period, in what the company said was a ‘very volatile period.
Nick Scali reported a final dividend of 35 cents per share, in line with last year, to be paid on 18 October.
The company has maintained a steady pace of growth, opening two new stores in 2023, bringing their total to 64 Nick Scali and 43 Plush stores.
The company expects to open three new Plush stores and one new Nick Scali store in FY24.
Outlook for Nick Scali
Today’s share price jump reflects a pleasant surprise for shareholders and investors as the company shows resilience in a tough trading environment.
Today’s result beat market expectations by a handsome margin, with forecasts of a 37% fall in NPAT put to bed.
The strong strategic fit of Plush and Nick Scali is clearly producing strong results for the company, and the complementary business models have allowed successful store rollouts for both brands.
In the short term, concerns about a significant consumer slowdown could hamper FY24 results as the effects of interest rate hikes are starting to be felt by consumers who are tightening budgets.
Source: ABS
Spending on furnishings and household equipment seems to have improved somewhat since the May low, but further pain may still be ahead.
From here, it is vital that NCK keep its costs down and doesn’t repeat blowouts like the additional $4 million in logistics costs from this year.
Overall, Nick Scali’s results underscore its resilience and strategic prowess in navigating a challenging market environment.
NCK’s strong brand should be poised for sustained growth in the Australian and New Zealand markets. This should help the company weather the turbulent market and maintain its position as a premier furniture company.
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Regards,
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For Money Morning
