Nick Scali - Are Things Turning Good For This Furnishing Retailer?

  • Mar 25, 2019 AEDT
  • Team Kalkine
Nick Scali - Are Things Turning Good For This Furnishing Retailer?

The North Ryde, Australia-based Nick Scali Limited (ASX: NCK) is a furniture retailer based in Australia as well as New Zealand. It offers an extensive product range including dining tables, lounges, chairs, armchairs, buffets, cabinets, coffee tables, TV units, consoles, rugs, mirrors, lamps and others.

The company’s valuation stands at over AUD 473 million to date with ~ 81 million outstanding shares. On March 22nd, 2019, the NCL stock closed the market trading at a sell-off price of AUD 5.850 with ~ 64.6k shares traded through the day. Today, 25 March, the stock is trading at AUD 5.700, down 2.56% (as at 1:00 PM AEST).

The stock performance has improved over the last few months with the YTD return positive at 14.48%. The stock started rising from the level of A$4.800 in the month of January 2019 to the level of A$6.180 in the month of March. The stock marked its strongest gain in the month of February since the commencement of the year 2019.

On February 6th, 2019 the company announced an ordinary interim dividend of AUD 0.25 per share to be paid on Wednesday, March 27th, 2019, representing a payout ratio of 80%.

For the half year ended December 31st, 2018 (1H FY2019), Nick Scali reported a rise of 10.3% in sales to $ 141.1 million from $ 128 million in the prior corresponding period (PCP) ended December 31st, 2017 (1H FY2018). The gross margin also improved by 20 bps to 62.8% on PCP. Besides, the net profit after tax (NPAT) increased to approximately $ 25.4 million, by 8% on $ 23.5 million in the PCP. Also, the EBITDA increased by 7.5% to $ 38.2 million, and the operating expenses also grew as a percentage to sales to 36.1% due to the timing of four new store openings and inflationary cost increases in stores with flat sales growth. Around three stores were opened in Queensland (Mackay, Morayfield and Brisbane Airport), and the last one in Hamilton, New Zealand.

With the release of half yearly results, the stock opened at AUD 5.620 (previous day’s closing of AUD 5.160) and closed at AUD 5.550 on 6 February 2019. NCK is currently trading at AUD 5.700, down 2.56% as on 25 March’19 (As at 2:05 PM AEST).

In December 2018, a new product range of Bedroom and bedding category was launched across 24 stores. Going forward, the company has announced plans to further open another two stores in the second half of FY2019 taking the Nick Scali Furniture store network to 57 by June 2019.

The company closed the half-year with a strong cash position, and the net cash and term deposits amounted to $ 38.2 million. The last half-year performance exhibits growth in top line sales accompanied by record profit amidst a challenging retail ecosystem, demonstrating the company’s resilience to withstand periods of low.

The investors may want to keep a close eye as the overall outlook is turning out positively for the furnishing retailer. As per the vision presented for the upcoming months, the company anticipates total sales growth will continue to be underwritten by store network expansion. However, with a rising uptick in volatility in recent sales and the global uncertainty, the guidance around profitability for the full year to June 2019 is difficult to be estimated.


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