Nick Scali says that higher shipping costs are expected to hurt his profits in the June half as orders for sofas have jumped.
Anthony Scali, the group’s chief executive, said that about 40 per cent of his company’s furniture is sourced from Vietnam, which was hit by government shutdowns last year.
Production was also affected by the lockdowns in various industries such as footwear and furniture.
There was also no chance that the local furniture industry would recover from the supply chain upheaval.
The uncertainty over the supply chain’s timeline had caused delays in processing orders. He says that high shipping costs could push up margins in the short term.
The company cut its interim dividend by 17 per cent to 35 per share as its first-half profit slumped 17 per cent. It had to shut 55 per cent of its stores in July and October due to the supply chain disruptions.
According to Mr Scali, orders for his company’s products have increased by about 70 per cent since a year ago, though the delays caused by the supply chain disruptions are still affecting the company.
The company’s order book has also improved over the past year due to the uptick in foot traffic and the shortening lead times from its suppliers.
During the half-year, government lockdowns affected over half of the company’s stores. Despite the disruptions, the company’s revenue grew by 5.4 per cent to $180.3 million.
In January, sales at Nick Scali stores fell 6 per cent due to a drop in foot traffic. It had started the month with a decline of almost 25 per cent as more people avoided buying the cheaper version of COVID-19.
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