Nick Scali Share Price Jumps on Higher Profits (ASX:NCK)
At time of writing the Nick Scali Ltd [ASX:NCK] share price traded at $10.74 up 8.59%.
Nick Scali Ltd recently announced its underlaying profits would jump substantially for the end of H1 FY21.
Retail and the pandemic
2020 will always be remembered as the year of the COVID-19 pandemic that shut down the world.
Emerging in February, the virus halted life as we all knew it.
With national lockdowns and stay home orders in place across the globe, the virus touched every form of business.
With many people having to stay home the effect on retail sales for homewares and furniture was notable.
Nick Scali Ltd undoubtedly profited from it.
The company recently announced better than expect results for H1 FY21:
- Unaudited Net Profit After Tax for the six months to 31 December 2020 is expected to be $40.5 million, up approximately 100% on the underlying profit for the prior corresponding period
- Total written sales orders for the first quarter of FY21 grew by 45%. This compares to second quarter growth of 58%, which was driven by the reopening of the Melbourne metropolitan stores
- The sales order book was at an all-time high at 31 December 2020
The Nick Scali share price and 2021
With the sales order book looking strong, this is expected to turn into profit growth for the second half of the financial year.
With stores opening back up in Melbourne and the supply chain issues created by COVID-19 being alleviated, Nick Scali looks to be in good shape.
Looking at the chart below, at time of writing the price sits at $10.70. If the move up continues the levels of $11.20 and $12.10 may provide future resistance.
Should the price start to fall away then the level of $10 may be enough to halt the fall — which is the most recent all-time high.
NCK appears to have followed the trend that most retail shares have over the pandemic.
A large fall into the march low, then a sustained recovery throughout the rest of 2020.
With price now reaching new all-time highs, it becomes a question of how much longer the rise can continue.
With government support measures starting to scale back, there may be less money being injected into retail sales over the coming months.
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For Money Morning