The Nick Scali Limited (ASX: NCK) share price will be one to watch on Thursday after the furniture retailer announced its full-year results.
Key highlights include:
- Revenue up 14.7% to $232.9 million.
- Comparable store sales growth of 10%.
- Earnings before interest, tax, depreciation and amortisation (EBITDA) increased 39% to $55.7 million.
- Profit after tax increased 42.4% to $37.2 million.
- Final dividend of 14 cents per share fully franked and a 3 cents per share fully franked special dividend.
- Earnings per share of 46 cents.
- Total number of stores at 30 June 2017 was 51.
- Outlook: Management warns same stores sales orders growth will be challenging in FY 2018.
Overall I felt this was another impressive result from the market leader in the furniture industry.
To post same store sales growth of 10% in a weak retail environment is nothing short of spectacular and management should be commended for it.
Another highlight in my opinion was its increase in margins during the last 12 months.
Thanks largely to its continued focus on product, price, and range management, and a reduction in operating expenses, Nick Scali saw its operating margin increase to 23.9% from 19.8% in FY 2016.
What's next?
But as strong as its result was today, I feel certain that the market will be more focused on its outlook for FY 2018.
Which I believe is fair to say was somewhat disappointing. Given a likely slowdown in housing sales, management has warned that its same stores sales orders growth will be challenging in FY 2018.
Furthermore, although the company is intent on opening up 10 new stores during FY 2018, it doesn't expect these openings to benefit its earnings until FY 2019. This is due to the associated start-up costs of new stores and their staggered starting dates.
Should you invest?
Whilst I am a big fan of the company and believe that the staggering 375% rise of its share price over the last five years has been more than justified, I am concerned that now might be the wrong time to invest in its shares.
I would suggest investors hold out to see how the market reacts to today's result. Should its shares fall down towards the $6 mark at some stage in the next few months, I would suggest investors consider an investment. But a price higher than that may be too much in my opinion.
Instead of Nick Scali, I would suggest investors snap up shares in retailers such as Premier Investments Limited (ASX: PMV) or Super Retail Group Ltd (ASX: SUL)
