Nick Scali share price plummets despite 70% profit boost

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 Scale 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.

The post Nick Scali share price plummets despite 70% profit boost appeared first on The Motley Fool Australia.

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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.

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