Nick Scali share price plummets despite 70% profit boost

Nick Scali posted a big profit boost for the half year but said it was too difficult to provide specific guidance for the half year ahead.

| More on:
Stock market crash concept of young man screaming at laptop on the sofa.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Nick Scali share price is tumbling on Monday
  • The ASX furniture retailer reported its half-year results this morning for the six months ending 31 December
  • Shares may be under pressure with the company reporting a year-on-year decline in written sales orders for January and opting not to offer guidance for H2 FY23

The Nick Scali Ltd (ASX: NCK) share price is taking a beating on Monday, tumbling 12.4% in morning trade.

Shares in the ASX furniture retailer closed at $12.42 each on Friday and are currently swapping hands for $10.88 apiece.

This comes following the release of the company's half-year results for the six months ending 31 December (H1 FY23).

Here are the highlights.

Profit boost fails to lift Nick Scali share price

The Nick Scali share price is deep in the red despite the company reporting some very positive metrics for the half year.

Those include a 70% increase in net profit after tax (NPAT) from to $60.6 million, up from $35.6 million in H1 FY22*.

(*Note, the H1 FY22 reported results were underlying. In H1 FY23, there were no adjustments from statutory to underlying results.)

Revenue for the half year came in at $283.9 million, up 57.4% from the prior corresponding period.

The company said the higher revenues were driven by "record deliveries due to the large outstanding order bank at the end of the previous half year". Reported revenues for the period also included six months of revenue contribution from Plush-Think Sofas, which Nick Scali acquired on 1 November.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) leapt 53.4% from the corresponding half year to $112.2 million, up from $73 million.

Meanwhile, costs fell with the company reporting a drop in its cost of doing business (expenses as a percentage of sales), down 2.9% to 32.1% during the half year.

And management declared a 40 cents per share, fully franked dividend. That's up 14.3% from the 35 cents per share paid in H1 FY22.

What did management say?

Commenting on the strong half-year results that are failing to lift the Nick Scali share price today, managing director Anthony Scali, said:

The integration of Plush is now complete with IT and distribution operations integrated during the half and we are well placed to grow our store network under both brands.

In 2H FY23 we are commencing a twelve-month program of refurbishment of over 40 Plush stores with new and improved product, image and store appeal to customers. We are excited about the potential to improve foot traffic and conversion in the current Plush store network.

Now what?

The Nick Scali share price could be under some pressure as the company reported its January 2023 written sales orders were 12.1% less than January 2022. Though that exceeded the company's expectations.

Nick Scali said it expects to open four new stores during the current half year (2H FY23). That's atop the two new stores it opened during the reported half year.

As for what investors can expect in the current half year, the company said, "The 2H FY23 result will depend upon trading during February to April and at this point it is difficult to provide further guidance."

That uncertainty may be spooking investors today.

Nick Scali share price snapshot

Despite today's big selloff, the Nick Scali share price remains up 3% in 2023.

As you can see in the chart below, shares in the furniture retailer have slid 18% over the past 12 months.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Earnings Results

Photo of two women shopping.
Earnings Results

Premier Investments share price jumps 9% on results and demerger plans

The Smiggle and Peter Alexander owner has released its results. How did it perform?

Read more »

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price
Earnings Results

Soul Patts share price struggles on falling profits

ASX 200 investment house Soul Patts reported its half year results this morning.

Read more »

a biomedical researcher sits at his desk with his hand on his chin, thinking and giving a small smile with a microscope next to him and an array of test tubes and beackers behind him on shelves in a well-lit bright office.
Earnings Results

Chemist Warehouse merger target Sigma reports 149% FY24 profit jump

This could be the last set of results from Sigma as we know it if its merger is approved.

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Earnings Results

Brickworks share price tumbles on disappointing half-year loss

This loss didn't stop the company from increasing its dividend again.

Read more »

A man sits on a bench atop a mountain with a laptop, making investments with a green ESG mind.
Earnings Results

ASX All Ords stock KMD tumbles as interim dividend cancelled

Investors are hitting the sell button on ASX All Ords stock KMD today.

Read more »

Coal miner holding a giant coal rock in his hand making a circle with his hand, symbolising a rising share price.
Energy Shares

New Hope share price charges higher despite profit crunch and huge dividend cut

Weaker coal prices have hit this miner's profits and dividend hard.

Read more »

A Chinese investor sits in front of his laptop looking pensive and concerned about pandemic lockdowns which may impact ASX 200 iron ore share prices
Earnings Results

Liontown share price tumbles 7% on half-year results

This lithium developer's results have been released this afternoon.

Read more »

A man in a hard hat and high visibility vest holds his thumb up in a gesture of confidence with heavy moving equipment in the background as on a mine site as the Chalice Mining share price rises today.
Earnings Results

Sayona Mining share price jumps despite $32m half-year loss

The Sayona Mining Ltd (ASX: SYA) share price is pushing higher on Thursday. At the time of writing, the lithium…

Read more »