Nick Scali beats guidance in tough retail environment
Written on the 6 February 2020 by David Simmons
Furniture retailer Nick Scali (ASX: NCK) can't put its feet up just yet despite pushing through a hostile retail environment in 1H20.
The company saw both its sales revenue and NPAT soften during the half, impacted by weak consumer confidence during what was supposed to be its busiest time of the year.
Nick Scali's NPAT was down 15 per cent on 1H19 to $21.6 million, but was well above the group's guidance for the period of $17-19 million thanks to better than expected sales in the latter part of the half year.
Sales revenue decreased by 2.5 per cent to $138 million, with negative same-store sales of 7.5 per cent.
"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," says Nick Scali managing director Anthony Scali.
"For the month of January, our biggest trading month, written orders declined 1.7 per cent and indicate that despite consumer confidence remaining fragile, we performed well in a very tough retail environment."
During the half the group only opened one new store, its third in New Zealand, bringing the total network of stores to 58.
The company hopes to open three new stores in the second half of FY20, bringing it closer to its ultimate goal of 80-85 stores across Australia and New Zealand.
Despite being optimistic about its abilities to perform in-store the company is uncertain about the retail environment as a whole.
"There is still uncertainty around the current levels of consumer confidence, which has been exacerbated by the coronavirus outbreak and other factors," says Nick Scali.
"Consequently it is very difficult to provide guidance as to the profitability for the full year to June 2020."
Online competitor Temple & Webster is unlikely to feel that same kind of doom and gloom about the coronavirus, considering it exists entirely online.
In comparison to Nick Scali, Temple & Webster (ASX: TPW) is surging ahead.
While its results are significantly lower (it recorded revenue of $74.1 million compared to Nick Scali's $138 million) its growth was monumentally better; seeing reported revenue up 50 per cent to Nick Scali's decline of 2.5 per cent.
"As market leader we remain in the best position to take advantage of the continued shift from offline to online driven by changing customer preferences and demographic shifts," said Temple & Webster CEO Mark Coulter on Tuesday.
"Our strategy of being a category specialist with a clear customer offering built around the largest range of furniture and homewares in the country, combined with the most inspirational content and the best customer service is working."
Shares in Nick Scali are up 3.6 per cent to $7.48 per share at 10.22am AEDT.
Business News Australia
Author: David Simmons