Nick Scali Limited

NCK Details
 
Robust first half FY17 performance: Furniture retailer, Nick Scali Limited (ASX: NCK) had reported a net profit after tax of $20.5m for the half year to 31 December 2016 and this was a stupendous rise of 44.7% on the previous corresponding period (pcp), well supported by a 15.5% increase in sales revenue to $118.4m. Primarily, NCK witnessed same store sales growth of 10.1% and the contribution from new stores. Moreover, the group has been able to control costs and manage efficiencies that resulted in a decrease of expenses as a percentage of sales to 36.4% against the 39.5% figure of H1 FY16. Favourable market conditions and efforts at group level in terms of store rollout program and economies of scale, have helped the group demonstrate great performance. NCK’s gross margins were reported to have strengthened to 62.0% owing to economies of scale from volume growth in the specialised categories. At the back of strong results, NCK declared fully franked interim dividend of 14 cents per share against the fully franked interim dividend of 9 cents per share for the previous corresponding period.
 

Half Year Result (Source: Company reports)
 
Store roll-out strategy:The group has been specific about the locations for the store roll-out and this strategy has primarily favoured the group so far. The store network continued to expand in the first half with three new Nick Scali Furniture stores opening since June 2016, in Hobart (first store in Tasmania), Geelong (VIC) and Jandakot (fifth store in WA).NCK is also planning to open two to three stores during the second half of FY17 and is building on a promising pipeline of new stores for FY18. NCK expects to have their first store in New Zealand in December 2017.
 
Stock Performance:The group earlier stated that the four-week trading period in January 2017 witnessed double digit growth in total sales orders and comparative stores sales orders over the previous corresponding period; and the continued favourable conditions are expected to prevail in second half of FY17. Over this positive outlook, NCK recently updated the market that net profit after tax for full year to June 2017 will be 40% up from previous corresponding period to $36 million - $37 million. The group has strength in terms of profitability scenario, balance sheet, store roll-out strategy and finds support from sound ownership. However, store rollout schedule from FY19 might come under slight pressure given the challenge in finding favourable sites. At present, the stock is trading at higher levels and the upside expected is not significantly enormous while the stock is about to touch its 52-week high price. We give an “Expensive” recommendation at the current price of $ 7.54


NCK Daily Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd currently hold positions in:  BHP, BKY, KCN, PDN, and RIO. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.