Highlights

• Nick Scali Limited reported FY26 group revenue of AU$516.7 million, up 4.3%, while underlying group NPAT increased 22.1% to AU$75.7 million.
• The ANZ business delivered AU$476.7 million of revenue and AU$80.5 million of NPAT, while gross margin improved to 66.0%.
• UK operations showed a meaningful turnaround, with the FY26 net loss narrowing to AU$4.8 million and the business generating an AU$0.8 million profit in 2H FY26.

Strong FY26 Earnings Spark Investor InterestNick Scali Limited (ASX: NCK) drew increased market attention after releasing its FY26 results for the year ended 30 June 2026. At the time of writing, the stock was trading at a current market price of AU$17.960, up 4.23%.

The positive market reaction appears to reflect stronger profitability, substantial margin improvement, progress in the UK turnaround and an increased dividend. Profit Growth Outpaces Revenue ExpansionNick Scali delivered group revenue of AU$516.7 million in FY26, representing growth of 4.3% from AU$495.3 million in FY25. More importantly, group gross margin expanded to 65.6% from 63.5%, an improvement of 210 basis points.

Net profit after tax increased 22.1% to AU$75.7 million, while EBITDA rose 13.6% to AU$180.7 million and EBIT advanced 18.0% to AU$124.7 million. The significantly faster growth in earnings compared with revenue indicates stronger operating leverage and improved merchandise economics.ANZ Business Remains the Earnings AnchorAustralia and New Zealand remained Nick Scali's principal profit engine. ANZ revenue increased 5.1% to AU$476.7 million, while underlying NPAT climbed 10.0% to AU$80.5 million.The segment's gross margin improved by 100 basis points to 66.0%, compared with 65.0% in FY25. Written sales orders increased 2.7% for the year, although momentum moderated during the second half as the company cycled strong prior-year growth.

Operating expenses increased by AU$5.0 million, primarily because of higher employment and marketing expenditure during the first half, with second-half costs broadly comparable with the prior year.UK Turnaround Emerges as a Key CatalystThe UK business arguably provided one of the most important incremental positives from the FY26 result.Although UK revenue declined to AU$40.0 million from AU$41.8 million, the division's net loss narrowed sharply to AU$4.8 million, compared with an underlying loss of AU$11.2 million in FY25. Importantly, the UK operation moved into profitability during the second half, recording AU$0.8 million of profit after a AU$5.6 million loss in 1H FY26.

UK written sales orders rose 31.4% to AU$45.0 million, while like-for-like written orders across Nick Scali UK showrooms trading throughout both comparison periods increased 19.0% in 2H.Margin Recovery Strengthens UK EconomicsThe improvement in UK gross margin was particularly notable. FY26 gross margin reached 60.3%, compared with 47.1% in FY25. Second-half margin strengthened further to 61.2%, versus 59.2% during the first half.

This margin normalisation, combined with stronger order growth, suggests the UK acquisition is moving closer to becoming an earnings contributor rather than a drag on consolidated profitability.Higher Dividend Enhances Shareholder ReturnsNick Scali declared a fully franked final dividend of AU$0.39 per share, compared with AU$0.30 in the previous year. Total FY26 dividends reached AU$0.78 per share, representing a 30% increase from AU$0.60 in FY25. The company scheduled the final dividend payment for 22 October 2026, with 1 October 2026 established as the record date.

The stronger distribution adds another supportive factor behind investor sentiment, particularly alongside the substantial increase in statutory group NPAT to AU$75.7 million from AU$57.7 million.Store Expansion Supports the Next Phase of GrowthNick Scali also continued expanding its physical footprint. During FY26, the group opened one new Nick Scali store in Ballarat and three Plush stores across Bendigo, Tuggerah and Cannington. Two additional Nick Scali stores opened in Bendigo and Bunbury during July 2026.

Management expects the four stores opened during FY26 and the two July openings to contribute positively to FY27 earnings. A further four stores are expected to open during FY27, supporting the group's network expansion strategy.FY27 Outlook Highlights UK MomentumEarly FY27 trading presents a mixed but constructive picture. ANZ written sales orders were flat during the first five weeks of FY27, as Nick Scali cycled high-single-digit growth in the prior corresponding period.

In contrast, UK momentum accelerated, with written sales orders increasing 35% year over year during the first five weeks of FY27. The group expects to open another UK store in October and is negotiating additional locations.OutlookNick Scali's share-price rise appears supported by several fundamental factors: double-digit profit growth, stronger consolidated margins, continued ANZ profitability, improving UK economics and a higher dividend.

The UK business remains an important variable for future earnings growth. Sustained order momentum and gross margins above 60% could materially improve the group's earnings mix if the turnaround continues. Meanwhile, additional store openings provide another avenue for organic growth.

Investors should nevertheless monitor discretionary consumer spending, housing-related demand, store rollout execution, cost inflation and the sustainability of the UK recovery. Overall, FY26 demonstrated that Nick Scali was able to expand earnings considerably faster than revenue despite subdued retail conditions.Note- All data presented is based on information available at the time of writing.Disclaimer for Kapitales ResearchThe materials provided by Kapitales Research, including articles, news, data, reports, opinions, images, charts, and videos ("Content"), are intended for personal, non-commercial use only. The primary goal of this Content is to educate and inform readers. This Content is not meant to offer financial advice, nor does it include any recommendation or opinion that should be relied upon for making financial decisions. Certain Content on this platform may be sponsored or unsponsored, but it does not serve as a solicitation or endorsement to buy, sell, or hold any securities, nor does it encourage any specific investment activities. Kapitales Research is not authorized to provide investment advice, and we strongly advise users to seek guidance from a qualified financial professional, such as a financial advisor or stockbroker, before making any investment choices. Kapitales Research disclaims all liability for any direct, indirect, incidental, or consequential damages arising from the use of the Content, which is provided without any warranties. The opinions expressed by contributors or guests are their own and do not necessarily reflect the views of Kapitales Research. Media such as images or music used on this platform are either owned by Kapitales Research, sourced through paid subscriptions, or believed to be in the public domain. We have made reasonable efforts to credit sources where appropriate. Kapitales Research does not claim ownership of any third-party media unless explicitly stated otherwise.

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