The Nick Scali Limited (ASX: NCK) share price is racing higher on Tuesday morning, preceded by the release of the company's FY24 first-half results.
Shares in the couch and luxury furniture seller are up 19.15% to $14.31, marking a new 52-week high. The move is diametrically opposed to the S&P/ASX 200 Index (ASX: XJO), which is currently down 0.86% to 7,560.30 points this morning.
Nick Scali share price on fire on earnings surprise
Several key figures stand out in the latest earnings release from the 62-year-old furniture retailer, including:
- Revenue down 20.2% from the prior corresponding period to $226.6 million
- Gross margin improvement of 3.6%, hitting 65.6% in the half
- Earnings before interest, tax, depreciation and amortisation (EBITDA) down 19% to $89.9 million
- Net profit after tax (NPAT) down 29% to $43 million
- Fully franked interim dividend of 35 cents per share declared, flat year-on-year
Rarely is there a silver lining within a 20% revenue decline. However, the details get interesting upon closer inspection.
For example, Nick Scali's written sales orders for the half barely budged, increasing a marginal 1.1% to $212.7 million. Although, the back half of the six-month stint appeared much stronger. Written sales orders were 8.2% higher in the later part of the reporting period (Q2 FY24), aligning with the holiday season.
Additionally, despite being down 29%, the company's NPAT of $43 million exceeded its prior guidance of $40 million to $41 million.
Wilsons Advisory called the result "strong" during a stretch of general retail weakness.
What else happened in the half
Nick Scali made little headway on expanding its store network during the December-ending half. There was no net movement, maintaining 64 stores across Australia and New Zealand for the Nick Scali brand.
The only change was the opening of a 'new and larger' location in Payneham, South Australia, with the existing location converted to a clearance store.
A couple of new additions were made under the Plush banner, though. Two stores were opened in Helensvale, Queensland and Payneham, South Australia. The company now operates 26 stores in the Sunshine State and eight in South Australia, bringing the total to 108 stores across Australia and New Zealand.
On a different note, managing director and CEO Anthony Scali cashed out 4.6 million shares during the first half, a whopping $53.45 million worth. Despite retaining the crown as the company's largest shareholder, investors sold off the Nick Scali share price on 23 November 2023 to the tune of 10%.
Funnily enough, the company's shares have marched almost 30% higher since the CEO parted ways with a portion of his substantial stake.
What's next for Nick Scali?
Investors are always looking to what is ahead rather than behind. Hence, today's optimism could be centred around the recent trading information provided within today's results.
According to the report, January written sales orders arrived at $58.9 million, an increase of 3.6% year-on-year. On a like-for-like basis, the change is a 2.6% uplift versus the prior corresponding period. The company noted, "[…] continuing the positive momentum of Q2 from the first half FY24", suggesting sales have maintained that upward trend.
Nick Scali share price snapshot
The past 12 months have seen shareholders traverse a wide-ranging Nick Scali share price. At its lowest point, shares have fetched $8.10 a pop and are now hitting 52-week highs of $14.31 today.
If we work on trailing 12-month numbers, Nick Scali shares now trade on a price-to-earnings (P/E) ratio of about 14 times earnings. This marks a departure from the below-10 times multiple that the Nick Scali share price has traded on for much of the past year.
