Nick Scali Shares Shaky Despite Paying its Biggest Dividend (ASX:NCK)

The share price of furniture retailer Nick Scali Ltd [ASX:NCK] is down slightly after its shares opened strongly on the back of its half-year results.

At the time of writing the NCK share price is down 9 cents or 0.85%, trading at $10.51 per share.

Shares opened at $10.95 today, with NCK’s HY21 results showing a solid return in sales.

NCK reached a peak of $11.10 before tapering off with the broader market weighing on today’s good news.

ASX NCK Share Price Chart

Source: Tradingview

However, we could see some decent growth in the NCK over the coming days with the retailer announcing a juicy interim dividend.

Outlook for NCK Share Price: Profit doubles despite COVID

Aside from its dividend, the two biggest standouts in NCK’s half-year results today are the impressive uptick in both sales and net profit.

In comparison to HY20, sales in HY21 grew by 24.4% from $137.5 million to $171.1 million.

NCK said this figure could have been even larger if it weren’t for supply chain and shipping delays affecting their ability to deliver within the half.

Net profit after tax just grew from $20.3 million to $40.5 million, a change of 99.5%.

This was in line with company guidance provided earlier in the year.

Gross profit margin for HY21 was 64.0%, compared to 62.2% in the prior comparative period.

The company was able to improve margins through reduced discounting — a trend we have noticed in several other retailers.

Accordingly, NCK said it would ramp-up its interim dividend.

The retailer declared a fully franked interim dividend of 40 cents per share, with a record date of 9 March 2021 and a payment date of 30 March 2021, representing a payout ratio of 80%.

Meaning the interim dividend falls just short of last year’s total dividend of 47.5 cents per share.

Could this set a more tantalising precedent for the final dividend?

Can Nick Scali continue to capitalise on a population of homebodies?

NCK said it continued to experience growth in its online sales channel in the half year with over $8.8 million of written sales orders and delivered an EBIT contribution of over $3.5 million.

The retailer now expects to significantly exceed the $4 million contribution previously forecast for the full year.

There remains significant scope for growth in NCK’s online segment, via product opportunities as well as continuing to build Nick Scali’s online presence in New Zealand.

As for the 2021 outlook, sales order growth for NCK in January 2021 was up 47% compared to the same period last year, representing the largest month of written sales orders in their history.

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Lachlann Tierney
For The Rum Rebellion

Lachlann Tierney is a writer for The Rum Rebellion and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. 

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