Nick Scali profit jumps but stock plunges

The boss of furniture retailer Nick Scali says strong employment is helping buoy consumer spending on big ticket items, leaving the company in a better position than it was pre-COVID despite the cost-of-living crunch hitting Australian households.

The ASX-listed homewares business reported a jump in first-half profits of 70.2 per cent to $60.6 million, while revenues were up 57.4 per cent to $283.9 million.

Chief executive Anthony Scali told analysts on Monday morning that trading was stronger than expected in January. “We had anticipated a slowdown compared to the COVID-19 boom, yet trading remains better than pre-COVID,” he said. The impact of rising interest rates had not yet dampened consumer confidence in the way that many expected, he said.

“One reason is the low unemployment rate and a significant increase in wages and salaries.”

Despite this optimism, the stock slumped on Monday as investors digested the earnings numbers and the company’s dividend of 40 cents, which came in below some analysts’ expectations.

The business also declined to provide guidance for full-year numbers, saying its performance would depend on the strength of trading conditions between February and April. That decision appeared to spook investors, and sent shares down 13.5 per cent to lows of $10.73 just after 1pm.

Nick Scali was the first retailer to report its December half-year results, making it a bellwether for other retailers. The ASX 200 was treading water at 7557.50 by mid-morning.

The company’s 40 cent interim dividend was up by 14.3 per cent on last year, but was slightly below market expectations.

Nick Scali is working to refurbish its Plush store network, which includes more than 40 stores, after buying the business in 2021 in a deal worth $110 million.