Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Nick Scali Ltd (ASX:NCK) reported a total revenue increase of 10.8% to 251.1 million.
• The ANZ Group achieved a gross profit margin of 64.4%, despite higher freight rates.
• Online sales orders for the ANZ group reached 18.6 million, marking a 17% increase.
• The UK business, despite initial losses, is expected to achieve a gross profit margin of 57-59% once fully transitioned to Nick Scali products.
• The company has a strong balance sheet with cash and bank deposits totaling 87.6 million and a net cash position of 15.9 million.

Negative Points

• ANZ Group's revenue decreased by 1.8%, with written sales orders down 2.2%.
• The UK segment reported a statutory loss after tax of 4.1 million, impacted by store refurbishments and product range transitions.
• New Zealand trading conditions remain more challenging compared to Australia.
• ANZ trading showed volatility with written sales orders down 8.5% in January.
• The transition and refurbishment of UK stores are expected to cause further disruptions and short-term losses in the second half of FY25.

Q & A Highlights

• Warning! GuruFocus has detected 9 Warning Sign with ASX:NCK.

Q: Can you provide more details on the ANZ trading update, which showed an 8.5% decline? Are there any specific factors contributing to this, such as competition or market conditions in New Zealand? A: The decline was primarily due to a significant drop in traffic during the Australia Day long weekend, which was down 18%. However, the last week of January saw a 5% increase, indicating volatility rather than a consistent loss of market share. (Anthony, CEO)

Q: How have the UK stores performed post-refurbishment and rebranding, and are there plans for new store openings in the UK? A: The four rebranded stores have performed better than before, with two stores showing significant improvement compared to the previous year. We are considering opening new stores in retail parks, but details are confidential at this stage. (Anthony, CEO)

Q: How did you manage to achieve a better-than-expected gross margin despite high freight rates? A: We adjusted some product prices in response to the high freight rates, which helped improve the margin slightly. Freight rates are now starting to decrease, which should further benefit margins. (Anthony, CEO)

Q: What is the status of the fab product clearance in the UK, and how is it impacting the transition to Nick Scali products? A: We are clearing fab products from stores and replacing them with Nick Scali products. In stores undergoing refurbishment, we send fab products to auction to expedite the transition. (Anthony, CEO)

Q: Are there any expected benefits from recent tariffs affecting US retailers, and how is this impacting your pricing from Chinese factories? A: The tariffs have not significantly impacted us as the business had already moved out of China due to previous tariffs. Chinese factories are offering good value due to slow business, as US retailers have shifted to other countries. (Anthony, CEO)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.