Nick Scali Limited (ASX: NCK), the well-known furniture retailer with brands including Nick Scali, Plush, and recently acquired Fabb Furniture in the UK, has captured significant market attention following its FY24 financial results announcement.
FY24 Financial Highlights
For the fiscal year ending June 30, 2024, Nick Scali reported the following key figures:
- Revenue: Decreased by 7.8% to $468.2 million.
- Underlying EBITDA: Fell by 11.2% to $175 million.
- Underlying EBIT: Declined 16.1% to $129.5 million.
- Underlying Net Profit After Tax (NPAT): Dropped 18.8% to $82.1 million.
- Statutory NPAT: Down 20.3% to $80.6 million.
- Operating Cash Flow: Reduced by 3% to $87.1 million.
- Final Dividend: Down 5.7% to $0.33 per share.
- Total Dividend: Decreased 9.3% to $0.68 per share.
The underlying profit figures exclude $1.5 million in transaction costs related to the UK acquisition. The acquisition contributed $8.3 million in revenue in the second half of FY24 but also added $3.3 million to operating expenses. The UK stores are currently undergoing refurbishment.
Positive Trends and Operational Developments
Despite the overall decline in revenue and profit, there were positive developments. Written sales orders in Australia and New Zealand for FY24 totaled $447.4 million, marking a 2.4% increase from the previous year. The gross profit margin in the ANZ region reached 66%, up 2.5% compared to FY23. The trend strengthened throughout the year, with the fourth quarter written sales orders increasing by 4.8% to $121.2 million.
Online sales for the Nick Scali brand saw a significant boost, reaching $34.8 million for FY24, which represents a 17.8% increase year on year. Enhancements in the e-commerce platform contributed to this growth. Additionally, the company expanded its store network, opening three new Plush stores and closing two. The UK operations saw the addition of 20 stores due to the Fabb Furniture acquisition.
Future Outlook
Looking ahead, Nick Scali aims to grow its store network further, with plans to open two new Nick Scali stores and three to five new Plush stores in FY25. The company has identified potential for up to 86 Nick Scali stores and 90 to 100 Plush stores in the long term.
However, the UK market faces challenges. Written sales orders have declined due to difficult market conditions, supply chain disruptions, and ongoing store refurbishments. The company anticipates that UK trading conditions may worsen in the first half of FY25 due to these refurbishments.
Despite current market concerns, there are expectations for future growth if Nick Scali can capitalize on the UK market’s larger population. The company’s commitment to dividends remains appealing, although the stock is facing a 2% decline today, reflecting broader concerns about the retail environment.