A case of Covid-hit 2020 redux for Sydney-based furniture retailer Nick Scali yesterday.
While it topped guidance by doubling net profit in the year to June, the worsening Covid Delta infections in NSW – and now the Hunter Valley and Victoria, as well as in Southeastern Queensland – underlined why the company avoided issuing guidance for the December half year, just as it did a year ago.
2020-21 turned out to be a record year for the company with a 42% lift in sales, an online sales boom thanks to Covid and the subsequent boost margins.
But that was in the year to June, since then the return of Covid has again made life difficult for the company.
“Despite the buoyant trading conditions, there is a high degree of uncertainty in the current retail environment, due to current and potential future lockdowns, supply chain challenges caused by lockdowns in sourcing countries, as well as the continuing escalation of global shipping,” Nick Scali said in its 2020-21 financial report on Thursday.
“Therefore, at the current time, it is not possible to provide profit guidance for the Company for the first half of FY22,”
The company though indicated the start to the new financial year in July had been mixed, especially online and in NZ, but not in some key markets, such as Sydney.
“Trading during July 2021 was impacted by government mandated lockdowns in Greater Sydney, Victoria and South Australia. Written sales orders were down 27% compared to July 2020, but up 24% on July 2019, despite Greater Sydney being locked down for the whole month.
“Victoria and South Australia have traded exceptionally well since having come out of lockdown towards the end the month.
“New Zealand continues to perform well with written sales orders for July up 91%, underpinned by the recently opened new stores and like for like sales growth of 10%,” the company said.
Online growth was up 88% for the month of July 21 compared to July 20, the company said. That’s a positive reaction to the lockdowns in the month – especially in Sydney.
The realisation of the lack of new guidance and a higher revenue, profit and especially dividend, saw the shares leap to $12.96 at the opening on Thursday, an all time high.
The shares retreated to close at $12.31, down 0.08% on the day.
The company reported a net profit after tax of $84.2 million which was above the most recent upgraded guidance of $70-$80 million.
Sales revenue jumped 42% to $373 million, thanks to same store sales growth of 34%.
Final dividend was set at 25 cents a share, up from the Covid-impacted 22.5 cents a share final for 2019-20. The company boosted its interim for 2020-21 to 40 cents a share, meaning the total for the year was a record 65 cents a share.
Total written sales orders for the year to June were $401.6 million and continued to outstrip sales revenue, resulting in an end of year order bank 35% higher than at 30 June 2020, the company said in its profit announcement.
Gross profit margin for FY21 was 63.5%, compared to 62.7% in the prior year. This result was achieved despite rising freight and supply chain costs experienced throughout the year, the company said.
CEO Anthony Scali, said in the statement “the most pleasing aspect of our FY 21 result, was the ability of our distribution network across Australia and New Zealand to deliver the materially elevated sales revenue whilst maintaining the same level of costs as FY20”.
During FY21 three new showrooms were opened in Bennetts Green (NSW), Maribyrnong (Victoria) and Wairau Park (New Zealand), with a further showroom subsequently opened in Hastings (New Zealand) in July 2021.
New showrooms opened during the financial year have performed above expectations and FY22 presents an opportunity to realise the benefit of a full year of trading in these locations.
The Company said it now has a total network of 61 showrooms across Australia and New Zealand and continues to assess new opportunities in line with its long-term showroom network target of 85 showrooms.
