Weak trading update drags on Nick Scali shares
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More news: Shares in Nick Scali were down nearly 5% to $14.39 after the furniture retailer warned that higher-than-expected freight rates will affect its margins and profit in the first half of the fiscal year.
The company expects gross profit margins for the first half to be down by 240 basis points and net profit for the Australia and New Zealand business to be between $30 million and $33 million.
Citi analysts said the trading update was weaker than expected, given the magnitude of the gross margin deterioration as well as the weaker than expected ANZ sales.
What they said: "While recent trading suggests there may be some green shoots, the magnitude of the 1H25 NPAT guidance miss versus expectations is likely to weigh on the stock today," the analysts said in a note.
"We also see the possibility that interest rate cuts may be pushed out, following strong labour market data, as a negative for the company's FY25 Australian sales prospects."
Nick Scali says freight rates to weigh on first-half margins
The news: Furniture retailer Nick Scali has warned that higher than expected freight rates will affect its margins and profit in the first half of the fiscal year.
The numbers: The company expects gross profit margins for the first half of FY25 to be down by 240 basis points compared to FY24’s 66%.
Net profit for its Australia and New Zealand business for the half year is likely to be between $30 million and $33 million, down from $43 million reported a year ago.
The context: In a trading update ahead of the annual general meeting, managing director Anthony Scali attributed the decline to “materially higher unexpected freight rates” which had eroded profitability in the main Australia and New Zealand market.
The furniture retailer said written sales orders in the four months from June to September were up 3% from a year ago. ANZ sales revenue is expected to be between $217 million and $222 million in the first half.
The group acquired specialist UK retailer Fabb Furniture in May, and it expects to incur a first-half loss at the UK operations.
The source: ASX announcement
