Furniture retailer Nick Scali warns freight company collapse will threaten first-half profits

Furniture retailer Nick Scali has warned the collapse of one of its freight forwarders has led to a significant number of containers delayed at ports, causing delivery headaches and threatening profits for the furniture store.

The company is expecting to incur unexpected additional storage and detention costs for about 240 containers — which cannot be quantified at this time — due to delays caused by the failure of freight line Lion Global Forwarding.

Nick Scali told the market on Wednesday these unexpected costs were adding significant risks to the company’s ability to hit prior net profit guidance of between $30 million to $33 million for the first half.

The company is unable to put a firm figure on the additional costs yet.

The ASX-listed company is one of Australia’s biggest furniture retailers and has a total network of 128 stores in Australia, New Zealand and the UK across the Nick Scali, Plush and Fabb Furniture brands.

“To resolve the issue the company made an application to the Federal Court of Australia to seek orders for the shipping lines to release the company’s containers through the giving of certain undertakings,” Nick Scali said.

“With the Court orders now granted, the company is working to have these containers delivered to its distribution centres to allow delivery of the goods to its customers as soon as practicable.”

At the company’s annual general meeting last month, managing director Anthony Scali flagged higher freight rates were expected to impact its gross profit margin.

Mr Scali had observed shipping costs to be about five times higher than last financial year.

Nick Scali entered the British market earlier this year with the acquisition of specialist UK home furniture retailer Fabb.