The Nick Scali Limited (ASX: NCK) share price is under the spotlight today after the furniture retailer announced its FY24 result.
This retailer owns the Nick Scali and Plush brands in Australia, and recently acquired Fabb Furniture in the UK.
FY24 result
Here are some of the highlights from the result for the 12 months to 30 June 2024:
- Revenue declined 7.8% to $468.2 million
- Underlying EBITDA declined 11.2% to $175 million
- Underlying EBIT down 16.1% to $129.5 million
- Underlying net profit after tax (NPAT) down 18.8% to $82.1 million
- Statutory NPAT down 20.3% to $80.6 million
- Operating cash flow of $87.1 million, down 3%
- Final dividend down 5.7% to $0.33 per share
- Total dividend down 9.3% to $0.68 per share
The underlying profit figures excludes $1.5 million of transaction costs relating to the UK acquisition. The UK acquisition added $3.3 million to group operating expenses and $8.3 million of revenue in the second half of FY24. It’s currently refurbishing the UK stores.
However, pleasingly, the Australian and New Zealand written sales orders in FY24 came to $447.4 million, up 2.4% on FY23. The ANZ gross profit margin reached 66%, up 2.5% compared to FY23.
The positive trend was stronger through the year, with ANZ FY24 fourth quarter written sales orders of $121.2 million, up 4.8%.
Nick Scali brand online written sales orders were $34.8 million for FY24, up 17.8% year on year. Enhancements in the e-commerce user experience helped drive growth, according to Nick Scali.
Three new Plush stores were added to the network, and two were closed. During the period, 20 UK stores were added to the network with the Fabb Furniture acquisition.
Outlook for the Nick Scali share price
The company has identified a long-term opportunity of up to 86 Nick Scali stores and between 90 to 100 Plush stores.
Written sales orders for June and July were down 1.2% year on year in Australia and New Zealand.
It’s planning to expand its store network – in FY25 it expects to open two Nick Scali stores and three to five Plush stores in FY25.
UK written sales orders are down, affected by tough market conditions, longer lead times because of supply chain disruptions, and the commencement of store refurbishments. UK trading is expected to deteriorate further in the first half of FY25 because of the store refurbishments.
I think Nick Scali shares have a compelling future if it can capitalise on the UK opportunity because there’s a much larger population in the UK than Australia’s. Nick Scali also tends to pay an appealing dividend too. If it crashed during concerns of a weak retail environment, I’d be very interested to buy shares, but it’s not trading cheaply, despite the 2% decline today.
