Furniture retailer Nick Scali has warned investors that persistently high international shipping costs will likely cut earnings in the current second half of the of the June 30 financial year.
The retailer has been mentioning its concerns about supply chain troubles now for the past 18 months or so, but the warning on Thursday was the strongest and most direct so far.
For the six months to December, Nick Scali revealed a 5.4% rise in revenue to $180 million but a 6.6% drop in net after tax profit to $35.6 million because of a combination of Covid related lockdowns and store closures and “widespread disruption to the supply chain”.
Margins as a percentage of revenue fell 2.8% to a still high.
“Despite over half of our stores being closed between July and October, and the impact of international lockdowns on our key suppliers, we were still able to deliver a strong earnings result, which was 75% up on H1 FY20,” managing director Anthony Scali said in the ASX release.
But the outlook was very different – revenue down 6% through January, though written orders – which are orders placed but yet to be fulfilled – were up 31% on 2020-21 as a whole and 92% on the December, 2020 half.
Nick Scali said while the company’s suppliers had reinstated normal lead times, which should improve revenue growth in the coming months, shipping costs were still too high.
“Shipping costs and the availability of containers remains uncertain, and will be a major obstacle in the delivery of the outstanding order bank.
“Whilst the Group continues to expect revenue to increase materially during the second half, the costs of shipping could well impact profitability during the period,” the company said.
During the half, Nick Scali paid $101 million to acquire Plush sofas, which contributed $1.8 million in net profit for half.
The company declared an interim dividend of 35 cents a share, down 12.5% from last year’s 40 cents a share and a sign of the caution about the June half.
Investors were not fazed by the dividend cut and pushed the shares up 0.9% to $14.54 in a market slightly lower for the day.
