Nick Scali’s online sales are still surging
Another lockdown and this time 16 million people are tied to their computers at home with very little to do but work and shop online. There’s some merit in the idea that online shopping boomed during the first lock down because a) it was novel, b) the government was handing out money and c) the boss wasn’t looking over workers’ shoulders. This time around, while the boss remains absent the government isn’t being as generous.
And that’s why we are taking an extra interest in the annual results and outlook statements of a variety of retailers. It’s also especially pertinent given the market valuations for many are suggesting a perfect future.
Nick Scali (ASX:NCK) released its FY21 results last Thursday. The company had previously directed investors to expect FY21 earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $120 million which included the net repayment of JobKeeper, and net profit after tax (NPAT) of $78 to 80 million.
Both revenue and EBITDA beat expectations with EBITDA beating the market’s forecast by 10 per cent. And despite logistics headwinds, the company reported an improvement to gross margins of just under three quarters of one per cent.
An important guide for future sales revenue is the company’s order bank which is up 35 per cent on FY20 suggesting Aussie consumers need still more couches, buffets and dining tables. The order bank exists when sales orders outstrip reported sales. Reported sales were up 42 per cent in FY21 to $373 million and total written sales for the year were $402 million.
One reason for reflection is the July written sales number, which was down 27 per cent on last July, but we note it is up almost a quarter on the 2019 figure. The lower year-on-year July written sales number can probably be attributed to Sydney’s extended lockdown and perhaps the after effects of some end of financial year or clearance promoting.
The company opened three new showrooms in New Zealand, New South Wales and Victoria and they contributed an aggregate $5.1 million to revenue growth and $10.7 million to sales orders – ahead of expectations. As they weren’t open for the full period (average period for FY21 was five and a half months), FY22 will be their first full year contribution.
The all-important outlook statement revealed Victoria and South Australia were trading “exceptionally well” post June and when not in lockdown. In New Zealand conditions are even better with written sales orders for July almost doubled thanks to new stores and like for like growth of 10 per cent.
Despite our nagging concerns, online sales are still surging and July online growth was 88 per cent versus July 2020.
As we expect will prove to be a common theme this reporting season, Nick Scali management refrained from offering guidance. Lockdowns and the spread of the delta strain have crimped CEO optimism. The company called out lockdowns in source countries and global logistics as key areas to watch.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
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