Nick Scali shares have jumped more than 10 per cent after the furniture retailer beat its underlying first-half profit guidance, though its net result slipped amid a “fragile consumer environment”.
The company said revenue for the six months to December 31 fell 2.5 per cent to $137.5 million, weighed down by a horror first quarter when it experienced a “significant drop in store traffic” and negative comparable store sales growth of 8.3 per cent.
Net profit fell 15.7 per cent to $21.4 million.
However, its underlying interim profit result of $20.1 million beat guidance offered in October of between $17 million to $19 million.
“During the second quarter we achieved 3.5 per cent like-for-like written orders growth, which was a vast improvement compared to the first quarter,” Managing Director, Mr Anthony Scali said.
Shares in the company rose as high as $8.24 on Thursday before easing to $7.92 at 0220 AEDT, still up 10 per cent from Wednesday’s close.
Nick Scali said sales picked up during the second quarter to help it keep its interim dividend unchanged at 25 cents per share, fully franked.
But this still marked the first profit dip in several years for the retailer.
It has steadily grown profits since the first half of 2014/15 financial year on the back of a housing boom.
Despite seeing a recent improvement in sales and store traffic during the second quarter, Nick Scali on Thursday said there is “still uncertainty around the current level of consumer confidence”.
“(This) has been exacerbated by the coronavirus outbreak and other factors, and consequently it is very difficult to provide guidance as to the profitability for the full year to June 2020,” it said.
For the month of January, which the company says is its biggest trading month, written orders declined 1.7 per cent, while Managing Director Anthony Scali told investors the company had endured delays from factories in China.
But he said the retailer’s move to halve the proportion of its exposure to China to 40 per cent would ameliorate the effects of these delays.
One Nick Scali store was opened in Auckland in the second half of 2019 as the company increased its network to 58, with a further three new stores – two in Victoria and one in New Zealand – expected to open in the second half of the financial year.
NICK SCALI BEATS UNDERLYING GUIDANCE
* Revenue down 2.5pct to $137.5m
* Net profit down 15.7pct to $21.4m
* Interim dividend unchanged at 25 cents, fully franked.